June 21, 2002, 2:34 PM — Microsoft Corp.'s goal to expand the number of users connected to the Internet over broadband got a boost as the company announced it would team with Verizon Communications Inc. to deliver its MSN Internet service to Verizon's high-speed Internet customers in the U.S.
Microsoft Chief Executive Officer (CEO) Steve Ballmer and Verizon CEO Ivan Seidenberg announced the alliance between their companies' respective Internet services divisions, MSN and Verizon Online, Thursday in a conference call with the press. The MSN Internet Service is the Redmond, Washington, company's answer to services available through competitors such as AOL Time Warner Inc. As with AOL's Internet service, MSN subscribers sign on to the Internet with portal software that gives users access to such features as e-mail, streaming media and entertainment programming as well as online shopping.
Verizon Online DSL with MSN will be an enhanced version of that current offering, with some of the new services requiring additional fees, the companies said. It will be launched with the release of version 8.0 of Microsoft's MSN software and it will include services in addition to those currently available to subscribers, Ballmer said. The special Verizon services will include online file-sharing, Internet-based voice services and unified messaging, Microsoft said, without giving further details.
Ballmer characterized such fee-based services as something "that people expect over a broadband link." It has been developing some Web-based services based on its emerging .Net initiative, although plans to deliver those to consumers have stalled. The company has committed to spending about US$500 million this year in research and development of broadband services, Ballmer said during the call.
Microsoft and Verizon last month teamed to offer MSN services on Verizon wireless devices. The two companies said they plan to allow customers who purchase MSN broadband through Verizon to link that to the previously announced wireless data services. The deal calls for MSN and Verizon Online to market and sell the service to the roughly 34 million Verizon customers who can get access to DSL (Digital Subscriber Line). The service is expected to be available in early 2003.
MSN Broadband is currently available to customers through partnerships with other high-speed Internet providers, at prices ranging from $39.95 to $49.95 per month. Pricing of the service through Verizon Online was not disclosed. Top Microsoft officials have declared expanding the number of U.S. broadband users a top priority, in part so it can make available new Web-based services to customers. "There's at least 30 to 40 percent of U.S. households that I think ought to have broadband that don't have it today," Ballmer said.
Its partnership with Verizon marks the second major broadband deal Microsoft has signed under which it will provide online services for customers directly through a service provider. In April 2001, MSN struck an alliance with Qwest Communications International Inc., in Denver, to deliver MSN-branded broadband and dial-up Internet access in Qwest's 14-state local service area. The Qwest partnership will be unaffected by Thursday's announcement, Ballmer said.
Microsoft also resells broadband and dial-up Internet access under the MSN brand through various partner ISPs (Internet Service Providers). The Verizon and Qwest deals are different in that those two companies have agreed to market MSN over competing services. Additionally, Microsoft signaled that it would continue to announce partnerships to bring high-speed Internet services to customers that aren't served by Qwest, Verizon, or the other MSN partners that provide high-speed Internet services over phone and cable lines.
Verizon Online offers dial-up and broadband Internet access to consumers or businesses in its local service areas around the U.S. For example, Verizon had 1.35 million DSL (digital subscriber line) connections in service at the end of May in New York, according its Web site. Fifty-five percent of Verizon's 61.2 million access lines are "DSL ready," and it expects 62 percent of them to be operational by the end of the year, Verizon said.
MSN has about 7.7 million Internet subscribers, which includes dial-up and broadband users, the company said.
