Slay Bells Ring for Netscape in Deal With Firms

Netscape Communications Corp., seeking to cement its dominance in the critical market for World Wide Web browsers, announced Tuesday that five Baby Bells would promote its Navigator software when selling Internet service to their customers.

The move was seen largely as an attempt by the Mountain View-based company to contain archrival Microsoft Corp. Netscape’s Navigator browser claims 75% to 80% of the market, while Microsoft’s Explorer commands less than 20%.

Still, Netscape--whose founders invented the first browser for surfing seamlessly from Web site to Web site--knows better than to underestimate the world’s largest software company. In recent months, Microsoft has signed deals with AT&T;, MCI, America Online and CompuServe.

So Netscape fought back by joining with Pacific Bell Internet Services, Southwestern Bell Internet, Bell Atlantic Solutions, BellSouth.net Inc. and Ameritech Interactive Media Services, which boast a combined customer base of 72 million homes and businesses in 25 states and Washington, D.C. That could help Netscape add substantially to its current base of 48 million customers.

The deal won approval from Netscape investors, who bid shares up $3 to close at $63, a 5% gain. Trading volume on Nasdaq was nearly triple its three-month daily average.

But the benefit for the Baby Bell partners is far less clear. Indeed, four of the five phone companies’ Internet divisions were already recommending the Navigator software to their customers. The fifth company, Ameritech Interactive Media Services, will be launching its Internet service in a few weeks.

Plus, the Baby Bells’ online customers can still choose a rival browser, including Explorer, which can be downloaded for free on the Internet. Although the deal provides that the phone companies will designate Navigator as their default browser, they all pledge to support whatever browser option their customers want, potentially undermining the thrust of the agreement.

“This reminds me of the America Online transaction where Netscape became the preferred provider one day and Microsoft became the even more preferred provider the next day,” said Tarun Chandra, a technology analyst with Laidlaw Equities in New York.

To be sure, the phone companies will get a discount on the price they pay for the right to offer Navigator software.

They will also receive a marketing boost from Netscape, which will promote the Baby Bells through a new service on its home page, which welcomes 4 million visitors each day. The forthcoming service, called ISP Select, will make it easy for unsatisfied Internet customers to switch to the Baby Bells’ offerings. The downside: an array of competitors will be listed right alongside.

All parties also emphasized that the phone companies would provide free access to a two-month-old Netscape service called In-Box Direct, which delivers a package of customized news and information via e-mail.

But In-Box Direct is already free for anyone using Navigator’s version 3.0.

Baby Bell investors seemed to recognize that the deal mostly reinforces the status quo. They sent stock prices for four of the participating phone companies lower in Tuesday trading. Bell Atlantic’s shares rose, but only by 12.5 cents, to $60.375.

Some observers see irony in local phone companies aggressively promoting their Internet offerings when a mere six weeks ago they were warning that Internet traffic threatened to create dire congestion on the nation’s phone lines.

The Baby Bells say they have no choice.

“There’s a huge market out there, and if we don’t meet that need, somebody else will,” said Bob Casali, president and chief executive of Southwestern Bell Internet. “The demands on the network will be what they will be.”