Taiwanese broadband Internet service provider (ISP) GigaMedia yesterday announced the commercial launch of its two-way service in three key local markets, paving the way for wider expansion around the country.
The NASDAQ-listed company said it would make two-way cable Internet access available in Taipei City, Kaohsiung City and Taoyuan County. Previously only one-way cable access was available, requiring subscribers to use their phone line to complete a connection.
Yesterday's announcement comes on the heels of news last week that the company is working with cable TV content provider Star TV to form a 50-50 joint venture. The deal will see both sides put in around US$50 million to develop set-top-box technology for use in interactive television.
While the Star deal is a significant step for GigaMedia in terms of content and business strategy, Merril Lynch Taiwan analyst James Wang, who covers GigaMedia, noted that a more significant aspect of the Star deal is a pledge to finance infrastructure upgrades.
GigaMedia CEO Raymond Chang on Monday confirmed that Star had pledged around US$200 million to Giga's cable TV partners to help them upgrade their systems to provide two-way Internet access. That money will not go to Giga directly, but instead come in the form of loans to the cable partners that may be converted to equity holdings.
Star is clearly interested in taking a stake in Taiwan's cable TV and Internet industry, however the country's complicated cable TV investment laws mean that it may take time before the loans can be converted to equity.
Industry analysts have in recent months expressed concern about the slow pace of GigaMedia's two-way expansion, noting that many of the company's cable TV partners have yet to upgrade their systems to provide efficient high-speed Internet delivery.
Yesterday's announcement comes at a time when GigaMedia faces increased competition from other cable Internet providers as well as ISPs offering alternative ADSL technology.
In a research report last month, Merril Lynch said we believe the key for GigaMedia's success in the near term would be its ability to quickly upgrade and offer two-way Internet access to its 3.9 million homes-passed base.
GigaMedia's Chang has blamed the slow two-way rollout on a lack of licensing, however, analysts have noted that the licensing process is almost a rubber stamp for anyone who meets the basic requirements.
It takes around three months for the requisite two-way license to be issued, with a company required to have completed its upgrade before receiving the license.
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