Microsoft Launches Its On-Line Network

Gates Says Newest Service Isn't Anticompetitive, As Some Rivals Fear

By Don Clark, Staff Reporter
Wall Street Journal

Las Vegas -- November 15, 1994 -- Microsoft Corp. said it will launch its new on-line service in 35 countries next year, at prices that will meet or beat the competition.

In a long-awaited strategy statement, the Redmond, Wash., software company said its new service will be called the Microsoft Network and will use financial incentives and special development tools to attract companies that sell information. Though Microsoft didn't give precise figures, it promised to allow information providers to set their own prices for selling their wares over the service.

At a news conference at the Comdex trade show here, Microsoft's chief executive officer, William Gates, also rejected competitors charges that Microsoft Network will have an unfair advantage over other services. Though software for tapping into the service will come with Microsoft's next operating system, Mr. Gates argued that other services already have begun bundling similar software with personal computers.

"We don't think this is anticompetitive at all," Mr. Gates said, stressing that Microsoft's goal was to expand the business for all players, rather than grab market share. "If this is about splitting up the market, it's a poor market for all of us."

The service will be available at the same time as the Windows 95 operating system, which is expected by industry analysts in April. Mr. Gates said he remains "fairly confident" the operating system will be delivered in the first half of next year.

While on-line services have been growing rapidly, Mr. Gates said only about 4% of U.S. households subscribe to any of them. Among the reasons they don't are the difficulties of getting connected, Mr. Gates said.

Because Microsoft Network software will be included in the Windows 95, users will be able to highlight a symbol on their screen to log onto the network. A key selling point will be a series of shortcuts to find information; a person can send a symbol to another user that allows them to navigate to a specific information source by clicking on that symbol, saving many commands.

The service will be run by a bank of computers on Microsoft's campus in Redmond. AT&T Corp. and Sprint in the U.S., Britain's British Telecommunications and Canada's Unitel Communications Inc. have agreed to help carry the service to 35 countries and set up local numbers for dial-up access. Microsoft said the service will be available in 20 languages and the company will handle billing in 19 currencies.

Microsoft Network will include news and weather, science and technology, business and sports. Users will be able to get information about the Microsoft program they are using by clicking on another symbol, which will automatically log them into the service. Mr. Gates said such links and shortcuts may be used by other services that make use of Windows 95.

Most on-line services charge a monthly fee of $9 or $10 a month, plus access charges based on usage. Russell Siegelman, Microsoft's general manager of online services, said his service will start with the same combination of fees, but may be able to eliminate time charges in the second half of 1995 by offering a connection to Microsoft Network through the Internet collection of networks.

Most other on-line services pay such content companies less than 20% of the connection-time charges from customers who use that content. Mr. Gates said Microsoft would allow them to charge what they want for using that content. A newspaper, for example, might charge 50 cents for letting users view an electronic version of their publication.

Microsoft also plans to woo content providers with programming tools that let them control the appearance of their service. In a demonstration, a sample page from the newspaper USA Today resembled the paper version. (Mr. Gates said no agreement had been reached with the paper.)

Mr. Siegelman said the service will kick off with a selected number of content providers. Over time, however, the service will be open to all comers, despite fears by some competitors that Microsoft would discriminate against them. He said Microsoft has been talking with Novell Inc. of Provo, Utah, and Lotus Development Corp., of Cambridge, Mass., about offering information forums about their products on Microsoft Network.

Despite such statements, the connection between the new service and Microsoft's Windows 95 worries other services and software industry executives. "You buy a PC and it comes preloaded with the online service," said a senior executive at one competing company. "Suddenly Microsoft doesn't start with 5% of the market -- they have leveraged themselves into a dominant position."

Concerns over Microsoft Network are being used in arguments by Microsoft's competitors to the Justice Department, which is studying the company's proposed purchase of Menlo Park, Calif.-based Intuit Inc., which makes personal-finance software.


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