The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Microsoft Floors It in On-Line Race : Computers: Software maker says it will match rivals’ Internet access with Network service to be launched next month.

Raising the stakes in his company’s long-awaited plunge into cyberspace, Microsoft Chairman Bill Gates said Tuesday that his firm’s upcoming on-line service will offer full Internet access with its launch next month.

Microsoft had not expected to offer such a capacity until the end of the year. Its more aggressive posture is sure to further irritate the existing on-line service providers, who have accused the software giant of exploiting an unfair advantage by including the Microsoft Network software in the new version of its Windows 95 operating system.

America Online Inc., CompuServe Inc. and Prodigy Services Co. have scheduled a news conference in Washington today to present their case against Microsoft’s distribution plans, which are already under investigation by the Justice Department.

Gates, speaking to a conference of interactive software developers in Long Beach, said he was unconcerned about the competitors’ complaints or the government investigation, and Russell Siegelman, general manager of Microsoft Online Services, even directed a few barbs at the Justice Department and its antitrust chief, Ann Bingaman.

At the same time, the Microsoft team appeared anxious to temper expectations about the quality and popularity of its service in its early days. Siegelman stressed the importance of creating on-line content that would impress first-time users, and he dismissed estimates that the Microsoft Network might gain as many as 9 million subscribers in its first year.

“If we got 1 million in the first year we’d be happy,” he said.

However, some suggested that Siegelman’s soft-pedaling might merely be spin control aimed at discouraging Justice Department action.

Microsoft’s on-line rivals are expected today to distribute results from a survey of home computer users about attitudes toward competition in the on-line industry, and the likelihood that users would sign up for a particular service if all they had to do was click an icon on the main screen of their operating system--as only the Microsoft Network would allow.

But Gates dismissed allegations that distributing Microsoft Network via Windows 95--which is expected to sell 30 million copies by year’s end--would be unfair.

“Last week I was in a store . . . in Seattle and the first five magazines I picked up had America Online access software on them,” Gates said. “All we’re doing is using Windows 95 as the distribution vehicle to get the access software out there.”

Added Siegelman, in his jab at the Justice Department and Bingaman: “We’ve targeted the Microsoft Network to launch in August with Windows 95. Sorry, Ann.”

Still, Siegelman acknowledged that it will not matter much who dominates the on-line service market if the millions of new users expected to venture into cyberspace over the next several years do not find a compelling reason to come back.

“A lot of people get on-line and they see a lot of sex chat and flame mail and they wonder where’s the there there,” Siegelman said. “We as an industry have to bring the level of content up or people won’t stay on.”

To that end, Microsoft said it plans to make it possible next year to use its well-regarded Blackbird publishing tool to create content for on-line services other than Microsoft Network. Its Internet access service--similar to that already offered by the other on-line services--is designed to provide a seamless way for customers to reach beyond Microsoft’s own on-line offerings.

Another plank in the Microsoft platform will be basketball player Shaquille O’Neal, who announced Tuesday the launch of Shaq World, a service that includes basketball statistics, kids’ games, merchandise for sale and O’Neal’s private diary.

“Enough of this computer talk,” the Orlando Magic star proposed. “Let’s play one-on-one for the Network.”

Ever the shrewd businessman, Gates declined to take up the challenge.

Gates told the crowd of nearly 3,000 developers to think of the Microsoft Network as a “large community.” And while some skeptics questioned how adept the world’s largest software company would be in fostering the sense of community spirit, many said they were impressed by what they saw.

“This is the first time anyone’s put this much muscle behind an interactive developer’s conference,” said Andrew Klein of Boston-based CD-ROM developer Show & Tell. “They’re showing some pretty cool things.”

And then, of course, there’s the appeal of the built-in Windows 95 market. That may turn out to be especially significant for the European market, where on-line services have made few inroads.

“In Europe we’re two years behind everything,” said Michael Erhard, an interactive developer who spent nearly $7,000 to come to the conference from Munich. “But Microsoft products people buy right away.”