August 23, 1995

Internet providers say
MSN is 'mixed blessing'

By Timothy C. Barmann

Tomorrow, when Microsoft Corp. finally launches Windows 95 and its companion online service, Microsoft Network, the whole world will be watching.

And among those who will be keeping an eye on the success or failure of Microsoft Network will be a half dozen Rhode Island "Internet access providers" - companies that connect customers to the Internet.

Microsoft is about to leapfrog into their market by giving Windows 95 users easy access to the Internet via Microsoft Network.

Connecting to some Internet services will be a snap for Windows 95 users because the software to access MSN is automatically installed with the new operating system.

The inclusion of that software has drawn criticism from three of the largest existing online services - America Online, CompuServe and Prodigy. It has even sparked an antitrust investigation by the Justice Department, which is looking into claims that bundling MSN software with Windows 95 gives Microsoft an unfair advantage in the online service business.

But what sort of effect will Windows 95 and Microsoft Network have on small, local Internet providers?

Surprisingly, most say it will be a mixed blessing.

While Microsoft Network might steal away customers from one of the six Internet providers in Rhode Island, Windows 95 may actually help to increase their business.

That's because built right into Windows 95 is software that allows users to connect to any Internet provider, not just Microsoft Network. And that could be a boon to these local companies.

"It really is good news," said John O'Donnell, who runs bbsnet WORLDWIDE, a Portsmouth-based bulletin board system and Internet access company.

One of the main impediments to getting people hooked on the Internet, O'Donnell said, has been the difficulty in getting their software set up.

While Windows 95 alone doesn't contain all the software needed to explore the Internet, it does include networking software that dials your modem and makes the initial connection. That software is typically the most difficult to install on non-Windows 95 computers.

(The additional software needed, called a "Web browser," is available from Microsoft for free on the Internet or from several of the local providers.)

O'Donnell said that this built-in software will work to broaden his customer base. "A lot of what we're up against is a small market of very technical people," he said.

As for Microsoft Network itself, several providers say they are not that concerned about it taking away their business.

"Frankly, I think the MSN will be more of a worry for the bigger groups such as America Online and CompuServe," said Andy Green, president of Intelecom Data Systems (IDS) of East Greenwich.

"Small Internet providers have never really been in a position to compete with the 'big guys'," he said.

Local Internet providers and the national online services are different animals. An Internet provider offers mainly that - direct access to the global computer network. Online services generally offer the Internet and more - discussion forums, chat rooms and enormous software libraries - but their hourly rates are higher.

David Paolo, president of Log On America, a Providence Internet provider, said the online services, including Microsoft Network, just can't compete with the prices of local Internet access companies.

"The local providers are going to steal more customers away from the 'big boys' because they can't offer flat rate services," he said.

At first glance, Microsoft Network looks inexpensive - $4.95 a month - but subscribers get only three hours of connect time. Users, especially new ones, could easily use up that allotment in one or two evenings of exploring the Internet. Additional hours are billed at $2.50.

(As an incentive, Microsoft Network is offering a Charter Member Annual Plan to the first 500,000 to sign up: $39.95 for one year of service that includes 3 hours of monthly connect time. Additional hours are $2.50.)

Internet providers' rates in Rhode Island start at $10 monthly for 10 to 15 hours of connect time. O'Donnel's bbsnet WORLDWIDE offers unlimited access for a $20 monthly fee.

Besides price, national networks can't match a local provider's customer support, said Green, of IDS.

"We are a local company where people can deal with customers on a local basis, he said.

"When people have problems, they're not going to be able to go to Microsoft as easily as they'll be able to go to us."

Nevertheless, there's no question that Microsoft Network will give the fast-growing Internet an even bigger following.

O'Donnell is so sure that Microsoft's invasion in the online arena will have a positive effect on his business that he's working for them. He has been testing MSN since January 1994 and will be a supervisor of the MSN business and finance forums.

The bottom line for O'Donnell is that MSN is "not going to hurt local providers. I honestly feel these guys are going to expand the market, which is what we're all needing," he said.

"If you take the marketplace and you move it from 2 million to 40 million, I'm sure I'll get my share, and so will any other quality provider in the country."

CYBERTALK INDEX | TIM'S HOMEPAGE