IDC: MSN Reining In ISP Aspirations

  |  March 17, 2003   |  Comments

By signing broadband deals with Qwest and Verizon, MSN is laying the groundwork for exiting the Internet access business, according to a new report.

Since its inception, the oft-stated goal of MSN's online service was to wrest control of the dial-up Internet market from AOL. And while it has racked up more than 8 million subscribers, that's still about a third of its rival's tally.

Of course, Microsoft's experience and expertise is not telecommunications, but it couldn't stand pat as AOL locked in new subscribers and effectively walled them off from the Redmond, Wash., giant's portal and software offerings.

Other moves by AOL, such as its purchase of Netscape, a browser alternative to Microsoft's Explorer, and the acquisition of Time Warner, also prompted investment from Bill Gates and company.

Now, analysts at Framingham, Mass., IT reseach firm IDC say Microsoft, for a variety of reasons including the emergence of broadband, is backing away from a head-to-head fight. As evidence, they cite a string of recent Microsoft partnerships with telecoms.

For example, Qwest Communications has been offering DSL service that uses MSN as it start page for more than a year. Microsoft has inked a similar co-branded agreement with Verizon Communications. Microsoft also negotiated a deal to get MSN 8 content before Charter Communications broadband subscribers.

IDC officials were not immediately available for comment, however, in an interview with The New York Times, analyst Steven Harris said, "For years, Microsoft said it wanted to dethrone AOL. Now, it is going to be a software company."

The strategic shift likely means MSN will exit the Internet access market and probably sell its subscribers to another service provider, IDC concluded.

For it's part, MSN is not publicly backing away from its dial-up business, however, the future of access is in broadband connections, which it is delivering though telecoms, rather than directly.

In addition to playing to its strengths, cozying up to telecoms could open doors to new licensing deals, a key growth area.

For example, this morning Microsoft said it has signed a deal with Sprint to offer new mobile phones with Microsoft's Windows -powered Pocket PC platform. The phones, made by Samsung and Hitachi, allow for the voice calls, access of information and sharing of digital pictures.

And Earlier this year, the company rolled out an advanced version of its portal, featuring always-on instant messaging, for a Korean wireless carrier.

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