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FEBRUARY 28, 1996
In a move seen as a seal of approval for the safety and substance of the Internet, AT&T launches a service that offers regular customers five hours a month of free access to the net. Margaret Warner reports.
MARGARET WARNER: The world of cyberspace is coming a little closer to home. That at least is the intention of telecommunications giant AT&T. At a New York press conference yesterday, the company announced that beginning next month, it will offer AT&T's residential customers five hours of free Internet access each month for one year. And for heavier Internet browsers, AT&T has another plan, unlimited Internet access for less than $20.00 a month. The question for AT&T and others is whether this familiar and friendly corporate face will entice millions of new people online. To explore that question, we're joined from San Francisco by Halsey Minor, the founder and CEO of C/Net, an online magazine that reports on the Internet. Welcome, Mr. Minor. Tell me, why is AT&T making an offer like this?
HALSEY MINOR: (San Francisco) Well, I think they've realized that being in the online service business is extremely important to them as a telecommunications provider. I think you typically as a consumer associate telecommunications with AT&T. I think it's a perfect fit with who they are as a company, and I think part of the reason they're making an offer is they're a little bit late getting into the game, and I think they wanted to make sure that they become a very big player very quickly.
MARGARET WARNER: I want to turn to the consumer end but first let me ask you just to describe very briefly for our audience, what is the Internet?
MR. MINOR: The Internet is really sort of no different than the telephone network, except rather than carrying voice traffic, it actually carries pictures and graphics and text and audio and even video. The other difference is rather than connecting with a telephone, you actually connect with your, with your computer. The part of the Internet that people hear the most about, other than electronic mail, is actually the World Wide Web, and that is a service on the Internet which allows consumers to connect with other companies with video, audio, things like that.
MARGARET WARNER: All right. Let's look at this now from the consumer's point of view. Do you think that AT&T offering this service will bring in a lot of new customers who have been either uninterested or maybe even intimidated by the Internet in the past?
MR. MINOR: Absolutely. I mean, I personally, without sort of over-hyping this, I believe that this is probably one of the most important announcements since the actual formation of Netscape. What has happened is one of the largest companies in the world and one of the largest telecommunications players and also one of the most trusted brands has just said that the Internet is safe, that we're making the Internet convenient, and that the Internet is important, and they're doing it by--and they're doing it under the guise of operating a completely free service to the consumer. So I think that's very important. I think the fact that AT&T is guaranteeing, for instance, that anyone using their credit card making a purchase on the Internet doesn't have to worry and I think they're also making software available that helps parents protect their kid from certain Web sites. I think it's going to alleviate a lot of concerns that people have about the Internet.
MARGARET WARNER: It's not unlike the philosophy the telephone company used, what, some 70 years ago, which was to try to get everybody hooked up by making basic service very cheap. Would you agree?
MR. MINOR: Well, I would say definitely, and, you know, people have been saying for a long time that the power of the network is the square of the number of people who come onto it, and obviously, it gets more and more powerful as more and more people are there, and you know that if you send electronic mail to somebody that they will, in fact, be on the network. I don't think in the annals of telecommunications that anyone has ever rolled out service and priced it for no money.
MARGARET WARNER: For free.
MR. MINOR: And I think, you know, that's a new business model. I mean, Netscape did that, and it was a master stroke.
MARGARET WARNER: Explain briefly who Netscape is.
MR. MINOR: Netscape is the leading producer of a browser which actually connects people to the Internet.
MARGARET WARNER: To the World Wide Web.
MR. MINOR: Yeah. It's actually--if the telephone is the way that you hear people over the phone system, Netscape is the way you see things on the Internet. And their business model is essentially to give the product away and get some people like corporations to pay for it.
MARGARET WARNER: All right. Let's introduce a little skepticism or caution here. How many people really now are on the Internet?
MR. MINOR: Well, you know, there are a lot of different numbers. Nielsen, for instance, said that they believe that there are as many as 30 million people domestically who are on the Internet. There are a lot of people who don't believe that number and believe it's more in the range of say ten to fifteen million. I personally believe that 30 million is probably high. I do believe that the number of people who are coming on is growing very, very rapidly, and we can see it in the number of people who access our services on the Internet. And I also believe that with this announcement, with AT&T offering free access, there are going to be a lot more people a lot sooner.
MARGARET WARNER: And how much is AT&T going to have to invest financially to get this going?
MR. MINOR: Well, you know, it's interesting. I mean, their strategy is to roll this service out for free to their current long distance subscribers. The idea is that if you have--if you have Internet access through AT&T, which means that you have an AT&T mailbox, et cetera, so I would be Halsey@AT&T.com, for instance, but it's going to make it a lot harder for people to switch carriers. So if they can, if they can not have--if they don't have to spend as much money to actually advertise, to basically keep the same amount of market share, they can spend a tremendous amount of money.
MARGARET WARNER: You're talking about their long distance customers; it helps them hold onto those.
MR. MINOR: Absolutely. I mean, the whole idea is the notion of stickiness, that if I'm a long distance customer and I had AT&T's Internet access service, I'm less likely to switch over to MCI.
MARGARET WARNER: And finally quickly, before we go, there are a lot of other companies out there like America Online, CompuServe, who have been offering Internet access. What does this do to them? Can they compete?
MR. MINOR: Well, I think it cuts two ways. I mean, first, when somebody's offering something for free and it's going to be like AT&T, clearly that's a major competitive threat. The good news, however, is that AT&T has just come in and endorsed the Internet, and that's a good thing.
MARGARET WARNER: Mr. Minor, thanks for being with us. I'm sorry for our technical difficulties. Thanks again.