MSN goes free with BT deal

Microsoft's beleagured online service MSN has struck a deal with British Telecom (BT) to offer Internet access services free of charge. Dubbed MSN FreeWeb, the service is powered by BTClick and frees MSN up to concentrate on its ultimate aim of being a Web portal.

The service will go live on June 8, the same day Microsoft launches its Office 2000 suite. The service will not change and will need no additional software or re-registering although users of older versions of MSN will be encouraged to migrate their email to MSN's Hotmail. They will be able to keep their current MSN address as well. There is no free web space.

Gillian Kent, MSN's group marketing manager said that dropping the subscription charges "is in-keeping with our Web portal strategy -- the whole point is to drive traffic through the portal."

Noah Yassim, analyst at research company Jupiter acknowledged that MSN had been trying to de-emphasise its access business for some time. "It doesn't want to be in that game," he said. "It sees Yahoo and Excite as its main competitors, not other access providers."

Yahoo and Excite already have deals with BT to provide Net access and email facilities. Yassim said that if anything, this shows MSN up as being a bit slow out of the blocks because it is trailing what it regards as its main competition by some way.

"MSN is falling in line with the rest of the UK market," he said. "It won't make MSN market leader but it should at least make them more competitive."

Kent admitted that MSN's aim is to be the "UK's number one portal in 12 months time," and to be a "top five ISP," although she added that the latter may not happen and is not core to MSN's future.

"We've looked beyond making revenue on Net access," she said. "The model has changed away from access -- now its about e-commerce and Net services and access on any device. In doing so you open up into a very aggressive market place."

Yassim added that MSN's move to being free will increase the pressure on other providers who are not free. Demon, he suggested, cannot be far away from a 'free service' announcement while pressure is increasing on the two stalwarts of subscriber Internet services, AOL and CompuServe.

"We think there is a subscription opportunity in the future but not the way AOL is doing it," said Yassim. "Consumers would probably be willing to pay for Internet access if the provider had teamed-up with a telco to offer free local calls, for example."

Kent agreed that the pressure is now on AOL to change its structure. "I think AOL will struggle to maintain its current model. If AOL keeps charging it will end up with a core user base, but it will be restricting itself. AOL will have to change -- the acquisition of Netscape will make it change. The current model probably only has four or five months left in it."

AOL and CompuServe U.K. President and managing director David Phillips is sticking to his guns. Last week AOL reduced its subscription fee from £16.95 per month to £9.95 -- a move widely criticised by analysts and observers for not going far enough -- Phillips told ZDNet News that AOL still had far more to offer than the competition and that the company's policy of charging for access was right for his service. "We don't really see MSN as competition... they never really made it," he said.

Questioning the recent flurry of free service announcements Phillips said: "What you have to ask yourself is how long can this free model survive? Is it sustainable."

David Phillips has written an article for ZDNet explaining his belief in AOL's pricing strategy. It will appear on ZDNet News by midday.