Lawsuit Slows MSN Broadband Roll-Out
Microsoft Corp.’s plan to expand its MSN high-speed Internet service has been delayed by a lawsuit by Enron Corp., which could cost the software giant customers during the holiday season.
MSN, with Enron’s help, had hoped to have fast Internet access over telephone lines available in 45 markets starting Oct. 25. Instead, the service is available in only 33 markets, including Los Angeles and San Diego, a Microsoft spokesman said.
Houston-based Enron, which agreed in June to provide the backbone for a nationwide expansion of MSN’s service, contends that it isn’t required to deliver broadband services if Microsoft hasn’t first provided a billing and ordering system.
Microsoft officials declined to comment on the suit but said some of their other high-speed access partnerships, including a 14-state deal with Qwest Communications International Inc., are going well.
The delay is problematic because the holidays are a popular time for consumers to buy broadband access, often with new personal computers. It follows a string of setbacks for the roll-out of the service.
Microsoft has “a track record of picking broadband partners that don’t quite work out,” said Joe Laszlo, senior analyst at market researcher Jupiter Media Metrix Inc. “It definitely hurts them with customers who want broadband right now.”
The company originally began a service with NorthPoint Communications Group Inc., a now-bankrupt provider of fast Web access.
MSN expanded elsewhere by working with Enron competitors, which MSN Marketing Director Bob Visse declined to name. Most recently, MSN’s high-speed service expanded into San Francisco, Sacramento, Houston, Dallas, San Antonio and Austin, Texas.
MSN Product Manager Lisa Gurry said Microsoft will have broadband access for sale by the end of March to 90% of the households that have digital subscriber lines in their neighborhoods. MSN had aimed for 90% by last month.
Subscribers to fast Internet access services are expected to grow fourfold by 2006 as sales of slower access plans decline, according to Jupiter Media Metrix.
Top Internet service provider America Online, owned by AOL Time Warner Inc., also has been slow to get into the high-speed market, analysts said.
Laszlo said MSN and AOL might pay for their sluggishness with tougher competition from third-place EarthLink Inc. and from cable and telephone companies that have more experience selling high-speed Internet access.
America Online has more than 31 million subscribers, MSN has 7 million, and EarthLink has 4.8 million. Laszlo doesn’t think MSN or America Online can build the kind of lead in the high-speed market that America Online has in the slower dial-up access market.
“There is very little growth left in the dial-up access space for Microsoft or anybody, which leaves them with broadband as the only potential growth area,” said Youssef Squali, an analyst at FAC/Equities.
Analysts also said Microsoft still needs to find a cable partner that will let MSN use its network to sell fast access over cable lines. Cable is more popular than DSL with customers looking for fast Web service. The five largest cable providers control 51% of the U.S. high-speed Internet market.
MSN Vice President Yusuf Mehdi said last month that the company might be interested in an investment in AT&T; Corp.’s cable television unit, which AT&T; is considering selling.
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Times staff writer Joseph Menn contributed to this report.
