Microsoft, Verizon in broadband Web deal
REUTERS [ FRIDAY, JUNE 21, 2002 9:31:53 AM ]
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," said Seidenberg.
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.
Grant Winfrey, Senior Director of Marketing at Yahoo, 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. |
