Reed Stevenson
SEATTLE: Microsoft Corp. and Verizon Communications, the biggest US telephone
company, on Thursday said they would launch a co-branded high-speed version of
the software giant's MSN online service.
The digital subscriber line broadband service, to be built on Verizon's
network using phone lines to deliver high-speed Internet access, will launch
next spring and offer customers a portal with exclusive broadband content, the
companies said.
The deal gives MSN, which operates both as a Web portal and an Internet
dial-up service, a foothold into the nascent market for broadband access while
rival AOL Time Warner Inc. struggles to provide a competing broadband offering
to prevent customers from switching to alternative services.
"This is the right way to do it and put it together," Microsoft
chief executive officer Steve Ballmer told Reuters in a telephone interview.
Through the deal, Microsoft hopes to boost its 7.7 million MSN users by tapping
into Verizon's DSL user based of 1.4 million, with capacity to serve 34 million
total.
MSN, which also has a similar agreement with Qwest Communications
International Inc. to jointly market MSN and Qwest's narrowband dial-up and
broadband access services, will now market Verizon as its preferred broadband
provider.
The MSN-Verizon announcement came during the same week that Qwest's CEO was
ousted and replaced as investor concern mounted over its heavy debt load and
questions over its accounting practices. Verizon will also sell MSN as the
preferred portal and service provider and either company will customers for the
co-branded service, which is expected to cost between $39.95 and $49.95.
Verizon CEO Ivan Seidenberg said that he was not concerned about the risk of
MSN and Microsoft Windows' features, such as instant messaging, Internet phone
and video chatting, cannibalizing Verizon's conventional phone services.
"In the same way that wireless has turned out a be a substitute for
certain landline services, we need to create new sources of growth with
broadband," Seidenberg told Reuters. Ballmer said he thought such messaging
and videoconferencing features would be the "killer application" for
broadband services rather than premium content such as sports and entertainment
delivery over the MSN portal.
Microsoft and Verizon said they would share revenue in the alliance, but
declined to disclose details.
Service-broadband marriages
The alliance marks the latest development in a string of marriages between
Web content providers and telecommunications infrastructure providers.
Microsoft has been forging deals with cable-based broadband providers to
provide a high-speed Internet platform for MSN and AOL Time Warner has also been
seeking to ally with cable partners to beef up AOL Broadband.
"This partnering and co-branding is becoming a solid trend," said
Jeff Kagan, an independent telecommunications industry analyst. A smaller
alliance announced last month would bring MSN content and services, such as
instant messaging, to Verizon Wireless' mobile phone subscribers.
Earlier this month, Yahoo! Inc., pioneer of the Internet portal, and SBC
Communications Inc., the No. 2 US local phone carrier, launched a co-branded
national dial-up service and unveiled plans to launch a broadband service later
this summer.
Senior Director of Marketing at Yahoo, Grant Winfrey, said that Yahoo and
SBC's offering would "define the broadband experience for consumers,"
in response to the MSN-Verizon alliance.
While the Yahoo-SBC service would focus on content, Ballmer hinted that MSN
would open possibilities for integrating software services with a broadband
connection.
Microsoft's .Net initiative, which seeks to move software and services onto
the Internet, will be largely dependent on fast and reliable connections.
"We're seeing more and more of new scenarios from a software perspective
that will require a broadband connection to fire up," Ballmer said.
(C) Reuters Limited.