Wal-Mart will soon begin marketing broadband service, through a reseller arrangement with Hughes Network Systems. The broadband product will be HughesNet, which offers packages of satellite delivered broadband at download bandwidth speeds of 700kbps to 1.5mbps (not guaranteed). BusinessWeek is reporting that Wal-Mart will initially offer the service in 800 stores. It’s not clear if Wal-Mart will offer the broadband satellite product at the same price points as Hughes.
This move by Wal-Mart may have both positive and negative competitive implications. It really depends on how aggressive they intend to get with it. If this new arrangement ends up being a low visibility display in the back corner of the store somewhere, it probably won’t have much of an impact. But if Wal-Mart markets it aggressively and ties it to the sale of computers from their stores, perhaps a different story will emerge. Wal-Mart is notorious for their potential market changing behavior. They use their tremendous market power to squeeze their suppliers for lower prices. Many would argue that Wal-Mart is most responsible for pushing HDTV into the mainstream by aggressively selling sub-$1,000 HDTVs. Will they have a similar impact on broadband? Positively speaking, this Wal-Mart move could benefit the broadband landscape, by raising the visibility of broadband and educating the “broadbandless” demographic. Realistically speaking, Wal-Mart’s broadband hands will be somewhat tied, due to their reseller relationship with Hughes. Satellite broadband has some distinct limitations and tends to be higher priced. It doesn’t match up well against cable modem and DSL, either in performance or price. I don’t think this announcement will have all competitors “shaking in their boots.” But any time Wal-Mart makes a move, its worth observing. Businessweek even speculates that their next move may be into the home, offering “Geek Squad” type services. Perhaps marketing broadband is step one in a much more measured and complex strategy. Stay tuned.