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NetChannel ends service
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April 29, 1998: 2:57 p.m. ET
RCA to refund consumers, retailers for sales of Internet access device
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NEW YORK (CNNfn) - NetChannel Inc. said Wednesday it is discontinuing its service of providing Internet access through television sets.
The South San Francisco, Calif.-based company notified its 10,000 subscribers via e-mail that service will terminate, effective Sunday, May 3.
"With the subscriber level being what it was, it was not what we projected as critical mass," said James Gustke, vice president of marketing at NetChannel.
NetChannel's software provided Internet access through television set-top boxes that were marketed by Thomson Consumer Electronics of Indianapolis. The unit competed directly with Microsoft Corp.'s Web-TV unit.
Thomson, which markets under the RCA brand name, will send letters to consumers and retailers explaining refund procedures, company spokesman James Harper said.
"Our biggest concern is [that] the retailer and consumer is fairly treated. This is just an unfortunate circumstance for NetChannel," Harper said.
A total of 40,000 units were ordered and shipped by Thomson. The units were priced at $199 for the basic model and $249 for upgraded models.
Over the last two weeks, Thomson notified its network of 10,000 dealers across the nation to discontinue sales of the device.
"We notified dealers to discontinue the sale of what we call the network computer. Without the service, you don't have the product," said Frank McCann, a Thomson spokesman.
The move comes as NetChannel's financial difficulties appear to be worsening. In late March, the company reportedly entered merger talks with America Online Inc. But both sides have yet to come to an agreement after more than a month of discussions.
NetChannel's Gustke and a spokeswoman from Dulles, Va.-based AOL both declined to comment on the discussions.
Gustke pointed out that NetChannel remains in business and is in the process of revising its business strategy. It remains unclear if the company will continue to have relations with Network Computer Inc., the Redwood City, Calif.-based subsidiary of Oracle Corp.
-- by staff writer Robert Liu
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