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Microsoft, Verizon ally on broadband Web service

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CIOL Bureau
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Reed Stevenson

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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.

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"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.

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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.

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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.

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"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.

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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.

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