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Microsoft Gets Into On-Line Derby With New Service : Technology: Gates says Network will make it easier and cheaper for computer users to get access to all that information.


LAS VEGAS — Microsoft Corp. Chairman Bill Gates on Monday formally presented his concept of the electronic community: an on-line service called Microsoft Network that he hopes will do for the booming information-access business what Windows did for technophobic computer users.

At a luncheon for reporters and industry analysts at the Comdex computer trade show here, Gates said the new service "will make it easy and inexpensive" for users to browse the Internet, send electronic mail and call up news and other information. It will be launched as part of Microsoft's new personal computer operating system, Windows 95, which is scheduled to ship by June.

Although Microsoft has become the dominant player in the PC universe by selling stand-alone software, Gates sees the industry's future hinging on innovative communications and information services that go beyond anything now offered on the emergent information superhighway.

"It's not just movies on demand, it's not just computing," Gates said in his keynote speech here. By 2005, he said, communications, interactive commerce, interactive entertainment and computer-assisted delivery of health care and other government services will fundamentally change the way people live, and the PC industry as it is known today will seem like a quaint relic.

But Microsoft intends to use its dominance of the PC software industry today to help it carve out a big role in the information industry of tomorrow. The Microsoft Network, previously known in the industry by its code name Marvel, will play a central role in that strategy--and on-line competitors are understandably nervous.

Buyers of Windows 95 will be able to subscribe directly to the service with the click of a mouse, and they will have ready access to customer support. That could give the Redmond, Wash., company a big advantage in winning market share from rivals such as CompuServe, Prodigy and America Online.

Competitors are already taking action. Prodigy, a venture of IBM Corp. and Sears, Roebuck & Co., last month reduced prices and improved its Internet offerings. America Online of Vienna, Va., hopes to induce some of its "content providers," including magazine publishers and TV networks, to agree to exclusive arrangements.

Some analysts say Microsoft's entry could end up being be a boon to the entire on-line industry. Andy Bose, a vice president of Link Resources, a New York consulting firm, says Microsoft's marketing savvy and marketplace strength will probably result in more innovation, reinvigorating demand for on-line services. That, in turn, should help create a far bigger market for the services, which Gates said has been hampered by arcane "user interfaces" and a lack of compelling offerings.

By year-end, Bose estimates, on-line subscriptions will total 5.4 million, a number Microsoft expects to double or quadruple in quick order. But Bose added that the company will have to be careful for antitrust reasons, since its network will clearly gain from the near-monopoly position enjoyed by Windows. The Justice Department has already delayed Microsoft's proposed acquisition of Intuit Inc., the innovative leader in personal finance software that could be an important service provider on the Microsoft Network.

Russell Siegelman, Microsoft's general manager of on-line services, noted that Windows 95 users will be able to choose any on-line service and won't be limited to Microsoft Network. He added that America Online and others have "all kinds of ways to distribute" their services, including free trial diskettes contained in many computer magazines.

Key to Microsoft's initial success, Siegelman said, will be a low monthly fee and a low hourly connection fee for users. (He declined to provide specifics, but industry observers have speculated that Microsoft's fee will be perhaps half the $8 to $10 that other companies charge per month for basic service.) AT&T will provide telecom access for the network, and Digital Equipment was selected to provide computer support.

In the end, though, the key will be content. Siegelman said Microsoft is offering newspaper and magazine publishers and other information companies very generous terms, including freedom to set prices and to determine how their products will look on line.

Still, many content providers are wary of Microsoft's power and are reportedly driving a hard bargain.

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