MSN Internet Access is partnering with BellSouth, Qwest, SBC, and Verizon to offer DSL access to users nationwide. The initiative allies Microsoft with the powerful incumbent local exchange carriers (ILECs) after its prior allies—independent DSL resellers, such as NorthPoint Communications—went bankrupt. The announcement was made as part of a larger initiative called "MSN 7," which also involves a redesign of the MSN Web sites and MSN Explorer client application.

Teaming Up with the ILECs

MSN Broadband, the Microsoft-branded high-speed Internet access service, was offered through DSL provider NorthPoint until that company went bankrupt in Apr. 2001. (See "NorthPoint Demise Won't Impact Broadband Strategy" on page 23 of the May 2001 Update.) MSN Broadband remained on hiatus until August, when ILEC Qwest (in which Microsoft took a 1.3% stake for US$200 million in 1998) began offering MSN-branded DSL service to customers in 14 Western states.

On Oct. 25—the timing coincides with the worldwide retail release of Windows XP—MSN Broadband DSL service will also be offered through partnerships with BellSouth (which provides DSL to the Southeastern U.S.), SBC (which has a strong presence in California and the Midwest), and Verizon (which is most prominent in the Northeast and West). As the local providers continue to roll out DSL lines, Microsoft says that MSN Broadband DSL service will be available to 90% of DSL-capable homes in the U.S. by the second quarter of 2002. However, this number only measures the number of households that are within the theoretical distance limits for DSL service; the real number depends on many other factors, such as how quickly the ILECs upgrade their infrastructure (by adding DSL access points, for example).

The deal benefits both parties: Microsoft can once again boast that it offers nationwide broadband connectivity through its ISP, and the providers can leverage the brand power of the second-largest ISP to drive demand for DSL installations.

Why Broadband Matters

Fast, always-on broadband connectivity is crucial to Microsoft's future plans, particularly the .NET My Services, under which users will access and interact with personal information (such as a calendar) in a centralized, Web-accessible repository at Microsoft. Chief Software Architect Bill Gates has remarked numerous times that broadband availability has progressed more slowly than the company anticipated. The company's investments in competitive DSL providers like NorthPoint and Rhythms NetConnections may have spurred the ILECs to roll out their own DSL service more quickly, but their subsequent bankruptcies means the ILECs are now the only game in town.

But Microsoft is not relying exclusively on the ILECs for its future broadband initiatives, because there is no guarantee that these large providers will be any more capable of driving demand for and profiting from DSL than their independent competitors were. Instead, Microsoft is hedging its broadband bets by pursuing agreements with cable and satellite Internet access providers. The company recently signed an agreement with cable company Charter Communications to provide content for users of Charter's cable Internet access (see "MSN, Cable ISP Sign Agreement"). Another likely candidate is Microsoft investee AT&T, which previously partnered with Excite@Home to provide content and caching services to its cable Internet access customers; Excite@Home filed for bankruptcy on Oct. 1.

Other MSN News: MSN 7

Also on Oct. 25, the MSN Web site and MSN Explorer client application will undergo a number of relatively minor design changes. The changes, announced as "MSN 7," coincide with the Windows XP launch. The announcement itself helped divert media attention from AOL's "AOL 7" update, announced the same week.

The most interesting of the changes is My MSN, a new Web site feature which makes it easier for users to personalize their home page, although it offers fewer personalization options than the competing My Yahoo service. In addition, the MSN Explorer client—which serves as the default Web browsing and e-mail client for all new MSN Internet Access users, including MSN Broadband customers—will for the first time allow users to work with Hotmail messages offline. (MSN Internet Access requires users to use Hotmail, and does not offer POP3 e-mail service.)

Microsoft also included MSN's support for .NET Alerts in the MSN 7 announcement, although this new service was also announced during the previous week and is not limited to MSN. (See ".NET Alerts Launched".)

Resources

More information about MSN Broadband, including prices and areas in which service is available, is at broadband.msn.com.

For more on the history of competition between MSN and AOL, see "Latest MSN Launch Integrates Brand, Targets AOL" on page 22 of the Dec. 2000 Update, and "AOL Time Warner Presents Renewed Threats" on page 10 of the Feb. 2001 Update.