The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Encyclopedia Publisher Throws the Book at Microsoft Over New On-Line Service

In the latest thrust at Microsoft Corp., officials from a large software company made an unusual public complaint Tuesday, saying that Microsoft will not allow them on its on-line service because they make a rival electronic encyclopedia.

The charge adds to the list of gripes about anti-competitive practices of Microsoft, the world’s largest developer of personal computer software. The charge, whether or not it has any basis, also raises questions as to how Microsoft can both develop products for its electronic service and encourage others to do so.

The head of the Microsoft service, in response to the latest allegations, denied that his company refused to work with Tribune Co.’s new media division, which created computerized versions of Compton’s Encyclopedia.

Microsoft sells its own computerized encyclopedia, called Encarta, and plans to make it a standard feature of its on-line service, called the Microsoft Network, which is to begin operation later this year.

The charge came at a conference attended by more than 500 people representing publishers, the media, nonprofit organizations and other companies interested in developing products for on-line systems.

“In no way, shape or form are we going to block content providers from getting on the Microsoft Network because they compete with some other part of Microsoft,” Russ Siegelman, the company’s general manager of on-line services, told the audience.

But Elliott Dahan, vice president of strategic alliances for Compton’s-Tribune New Media, described for the audience his version of the exchange with Microsoft last week.

“I was told they viewed my encyclopedia as competitive to Encarta and they weren’t really interested in putting it on the network,” Dahan said.

Siegelman asked whether Dahan had tried to get in touch with him. Dahan said he had but that he had been told Siegelman was busy.

“That’s right; I am busy,” Siegelman answered.

“Saying we welcome content providers doesn’t mean we can handle everyone,” Siegelman said.

The exchange prompted leaders of the three largest on-line services, appearing on a panel with Siegelman, to repeat charges, which they have been making for months, that Microsoft is acting unfairly in another way.

Microsoft plans access on its software to its on-line service that would be easier than is access to rivals America Online, CompuServe and Prodigy. In the new version, due this summer, of Windows, the base software that runs most personal computers, Microsoft plans one-button access to the Microsoft Network.

“Is the level playing field made by crushing the other buildings down?” asked Scott Kurnit, president of Prodigy Services Co.

Siegelman responded by noting that companies in many businesses use distribution capabilities to promote new products such as magazines that include subscription cards for sister publications.

“I don’t think this is going to be a point of competition,” Siegelman said, arguing that customers will judge on-line systems by the features and services they offer.

Indeed, Apple has had trouble selling its on-line service, eWorld, collecting only about 42,000 subscribers despite including eWorld software with its new computers since last fall.

Because Microsoft’s software runs more than 80% of all personal computers, four times as many as Apple’s, its on-line service is perceived as likely to be more successful.

“Microsoft, sheerly by being Microsoft, will be a big player in this business,” said Adam Schoenfeld, analyst at Jupiter Communications, the consulting firm that sponsored the conference.

“It’s obvious Microsoft has set its mind to doing well on-line,” Dahan said after the session.