Information Processing: ONLINE SERVICES
EVERYONE'S RUSHING THE NET
If you're like most people who enjoy surfing the Internet and its World Wide Web, you're paying $15, $20, maybe even $50 per month to connect your personal computer to the Net over a phone line. By yearend, that may turn out to be $15, $20, or $50 too much. Executives who are privy to discussions at certain telecommunications carriers say that basic Internet service may, in the next few months, become gratis--a giveaway, perhaps only temporary, bundled with long-distance service.
Even if free Internet service doesn't materialize that quickly, the fact that it's even being considered shows how badly companies want to grab some of the Internet action. With dizzying improvements to the multimedia experience that it's able to deliver, the Net is now the undisputed center of the online services universe. And companies ranging from AT&T down to mom-and-pop operations are jockeying to win their fair share of the millions of American households--and thousands of businesses--that aren't plugged in. Between the two, "there are 160,000 new Internet users every month," reckons Scott B. Ross, president of MCI Business Markets, the long-distance company's business-services division.
MURDOCH'S GATEWAY. Indeed, the Internet access market will grow from $123 million this year to more than $4 billion in 2000, according to Forrester Research Inc., a market researcher in Cambridge, Mass. Maloff Co., another researcher, based in Dexter, Mich., estimates that the number of so-called SLIP connections, a particularly popular way of plugging PCs into the Net, is growing by 38% every month. Prices have slipped from around $50 for unlimited usage each month back in 1993 to as little as $20 today, depending on location and other service factors.
Not since the cellular-telephone boom of the late 1980s has there been such a mad scramble to win subscribers to a new communications service. Local and long-distance phone companies as well as cable-TV operators are all looking to grab a portion of this market. Commercial online services such as America Online, CompuServe, GEnie, and Prodigy Services are increasingly emphasizing their improved Internet connections--usually a freebie with the monthly subscription--as a way of keeping their 5 million-plus subscribers in the fold.
More competition is coming. Microsoft Corp. plans to make Internet access a major component of its forthcoming network service, and AT&T, the long-distance colossus, is getting ready to jump in. Rupert Murdoch's News Corp., which just got a $2 billion cash infusion from MCI, is thoroughly remaking its Delphi as a mass-audience gateway to the Internet. Already, MCI has made Internet access part of its networkMCI Business service, which bundles E-mail, fax, and teleconferencing into a single service. MCI also runs an electronic mall on the Internet.
Until lately, the Internet-access market has been wide-open to just about anyone setting up shop. All you had to do was get an Internet node--a simple engineering workstation and a few modems would do--and arrange to link up with a regional or national segment of the Net, and you were in business. Today, hundreds of companies buy Internet capacity in bulk and resell in smaller chunks--much as so-called aggregators do in the long-distance phone market.
TOO MANY TITANS. Not all Internet access companies are of the mom-and-pop variety. NETCOM On-Line Communication Services Inc. and PSI, for example, are hot startups that have raised $75 million and $42 million, respectively, in public offerings. They're proffering consumer-friendly software at the PC end and maintaining directories of the Net's scattered resources that make it all easier to navigate. With its mass-market NetCruiser software, running on Microsoft Windows-based PCs, NETCOM grew from 72,400 to 115,000 subscribers in the first quarter of 1995. With AT&T and Microsoft looming, however, the window of opportunity may be shutting for startups. Says Stephen C. Franco, data communications analyst at Yankee Group, a research firm: "There are too many large players around."
Many companies--large and small--are eyeing the business market, which may prove more profitable than the cutthroat consumer market. Among others, IBM, MCI, a number of Baby Bells, BBN Planet, and UUnet, which is 10% owned by Microsoft, are promising businesses security and reliability as they move toward electronic commerce on the Net. The total market, including consulting services: $415 million, says Yankee Group's Franco.
So far, one company has been conspicuous by its absence--AT&T. But that's likely to change by yearend. Since last fall, companies in the Internet business have been bracing for an AT&T entry. A company spokesman declines to comment, except to say that AT&T is indeed developing an Internet strategy, but sources close to the long-distance giant say that there is an ambitious plan, known by the unofficial name of AT&T On-Line. Customers anywhere in the country will have local, dial-in access to the Internet at the relatively high speed of 28,800 bits per second. AT&T is also likely to offer them the modems for that speed at prices well under current retail. What's more, the company has turned the focus of its New York-based Downtown Digital operation, originally set up to create interactive-TV services, to developing spiffy on-ramps to the Internet that even the nontechnical crowd can use.
AT&T is also working on Internet services for business customers. The nationwide service that it is developing to connect office networks using Novell Inc.'s NetWare, will be based on the TCP/IP protocols of the Internet. So it may be possible for AT&T to create, in effect, a sort of private Internet that would help businesses communicate securely but also offer access to the Net's other resources, such as the World Wide Web.
With or without AT&T, Internet access has turned into one of the hottest markets around. So if you're shopping for a connection, you would do well to avoid signing any long-term contracts. The competition is sure to bring new services and better prices for months, if not years, to come.
Who's Who on Internet Access
-- Pacific Bell
-- AT&T *
INTERNET ACCESS PROVIDERS
-- BBN Planet
-- America Online/ANS
-- Microsoft *
LOCAL RESELLERS AND BULLETIN BOARDS
-- Hundreds across the country
* Expected to enter in 1995
The networkMCI Business service is the carrier's entry into the Internet business derby, where it faces IBM, BBN Planet, and some Baby BellsBy John W. Verity in New York