Europe Enters The Cyberspace Race

With rare exception, the history of computer markets has been that whatever happens in the U.S. will play out a year or two later in Europe. That would make 1995 the year Europeans go online en masse--following the lead of stateside consumers. In the U.S., membership in services such as America Online, Prodigy, and CompuServe jumped from 3.13 million to 5.36 million in 1994, according to market researcher SIMBA Information Inc.

Sure enough, the battle for Europe's net surfers has begun. After taking an early lead with Minitel, the pioneering electronic information service that France Telecom gave away to all French phone subscribers starting in 1984, the Continent fell behind in the cyberspace race. But now, with 10 million home PCs installed and sales growing rapidly, the market is ripe. CompuServe Inc., the pioneering U.S. online service, planted its flag in Munich and in Bristol, England, four years ago and now boasts 206,000 subscribers. In 1995, a half-dozen new services will follow, including Europe Online, a Luxembourg-based service backed by British, French, and German publishers.

FORMIDABLE. Overall, market researchers forecast that as many as 500,000 Europeans could go online this year; by 2000, the market could swell to as many as 15 million. Modem sales in Europe grew 39% last year and are expected to jump 35% this year, according to Dataquest Inc., and by 1998 some 17 million modems will be in use on PCs. Even politicians are getting with it: German Foreign Minister Klaus Kinkel got wired on Jan. 14. At the Foreign Ministry's 125th anniversary, Kinkel bantered online with citizens--the first minister's electronic chat in Europe.

While analysts say Europe can support three or four services, a showdown is looming between the Americans--CompuServe, America Online, Apple's eWorld, and Microsoft--and homegrown nets such as Europe Online, backed by Germany's Burda, Britain's Pearson, and France's Matra-Hachette.

As in the U.S., the entry by software giant Microsoft Corp. is seen as the key event. The company plans to bundle software to log on to the new Microsoft Network with every copy of its next operating system, Windows 95, now due out in August. Microsoft, which plans to operate its network internationally from the get-go, will gain millions of potential customers overnight--without having to engage in costly marketing programs, which, says Europe Online Chief Executive Christian Bruck, eat up some 30% of operating costs for other networks. "Microsoft will be our most formidable competitor," he says.

But if content is the key to winning market share, Europe Online is likely to have a strong home-court advantage. Its three main shareholders own roughly 500 publications, including the Financial Times, Germany's Focus, and France's Elle. Europe Online's owners are keen on spinning their print empires into electronic gold. By contrast, Microsoft, Apple Computer Inc., and others will have to start mainly with their U.S.-based content and scramble for local European offerings. That's a cause for worry among some U.S. executives: "Do you really think Europeans will buy an American service?" one doubting Microsoft manager asked a reporter at Milia, a January multimedia convention in Cannes where Europe Online made its debut.

VOCAL LOCALS. A big challenge for the Americans will be to come up with services that are geared to each market and language. CompuServe has a handful of local services, including a German newswire and a British "Good Pub Guide." But CompuServe in Europe is mainly aimed at consumers doing research or seeking technical support. "The main strategy is to add local content," says Paulette White, Compu-Serve's vice-president for international operations.

America Online, now vying with CompuServe for the lead in the U.S., had tried to join the Europe Online consortium. Instead, the consortium decided to license the Interchange technology developed by Ziff Communications Co. and now owned by AT&T. While AOL retools its international plans, it is providing access to the U.S. system in 132 cities in 42 countries. Prodigy has no presence beyond North America, but it is said to be discussing partnerships with several major European companies.

In the meantime, Europe Online plans to start up with hundreds of local services in French, English, and German by yearend. Europe Online hopes to incorporate an automatic translation program that will allow members of different nationalities to converse with each other--a technology that CompuServe is now testing. Another entry: Italia Online. Backed by computer giant Olivetti and Milan's top financial newspaper, Il Sole 24 Ore, the Italian service will feature local news, interactive catalogs, and chat networks.

Lagging behind but not out of the race yet, France Telecom also plans to upgrade its ancient but popular Minitel service. Minitel has 6.5 million dedicated terminals and 20,000 service providers. But its slow text-based menu is no match for slick new technologies. So the service may soon be forced to consider switching to a PC-based network. But despite its outdated look, Minitel has created popular local services that consumers are buying. And that may be the most valuable lesson of all.

Putting The Old World Online


COMPUSERVE The granddaddy of online services has 206,000 members in

France, Germany, and England.

APPLE Launched in Britain and the U.S. last

eWORLD October, is slated to expand to other parts of the Continent

by yearend.

EUROPE Sponsored by a consortium of European

ONLINE banks and publishers, the service is scheduled to go up in

France, Germany, and England in 1995.

MICROSOFT The software giant's online debut won't NETWORK happen until

Windows 95 is ready, but Microsoft will be international from

day one.


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