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To: Wizard who wrote (72151)	8/5/1999 1:57:00 PM
From: Eric Wells	Respond to of 164684

>>The issue is if they do it 'at cost.' Wizard - thanks for your message. I don't know what Microsoft is going to do - I'm basing my statements on the speculation in the WSJ article. The article says "Microsoft executives are laying plans to hasten the trend toward low-price, or even free, internet access." The article also quotes Brad Chase, Microsoft VP of the Consumer and Commerce Group, as saying, "We intend to be aggressive with access." And then further, he says, "AOL might think about it as a profit center. That's not how we think about it." Certainly, nothing is free. For a user to access the internet, they must have a computer, modem, phone line, etc. - this all costs money. But if Microsoft's internet access charges are $0, that's $21 a month less than AOL's - and to me that's enough of a difference to have a strong influence on choice of ISP. And again, I think the greater concern is in Microsoft capturing a larger number of 'new' customers, as opposed to taking a significant number of 'existing' customers away from AOL. Regarding the Justice Department - I'm not so certain there is an issue here. Microsoft could successfully argue that the access charge is only one component of the price of internet service - that there are other components (other services that are provided to MSN subscribers at a charge) that must be factored into the price as well. If you look at cost/user for internet Access for AOL, Microsoft or any other ISP, I would argue that a large percentage of that cost is the marketing and advertising cost required to get the customer - and I don't believe that the Justice would look at such costs in evaluating whether Microsoft is selling a service 'below' cost. I agree with you that Microsoft has not done well in offering internet services to consumers (MSN has never really taken off) - although I believe certain services Microsoft offers have done pretty well (I seem to recall hearing that Car Point and Home Advisor are showing some good numbers). But I wouldn't be quick to write off the Microsoft juggernaut. As an analogy, I offer the following two examples: (1) Microsoft gave it's first demonstration of Windows in 1985 - at the time it was ridiculed when compared to the Mac - and it was not until 7 years later with the release of Windows 3 that Windows finally took off; (2) Microsoft released it's first version of Excel (the spreadsheet) in 1985 - it was not until 1994, nine years later, with the release of version 5 of Excel that Microsoft finally started to capture market share away from Lotus and Borland. Microsoft has a history of relentlessly pounding away at business areas until it gets it right and captures market share. I'm not saying Microsoft will do it again - if anything, Microsoft's large size is working against it. However, I am saying that it is possible that Microsoft could make a dent in AOL's domination in internet access. With AOL's current PE at 145 (at a stock price of 83.56), should AOL falter in growing subscribers just one quarter, it could be devastating to the stock price (in my view). Thanks, -Eric