New Competition Worries On-Line Services

As Microsoft Corp. completed work on its Windows 95 program Friday, leaders of on-line services charged the company will hold a monopolistic position when it enters their business next month.

But the head of Microsoft’s service said the company is no different than two other newcomers in the on-line business, long-distance service providers AT&T Corp. and MCI Communications Corp.

“It’s just Microsoft using its distribution. Every company will use its distribution channel, and that’s a lawful thing to do,” Russ Siegelman, general manager of on-line services at Microsoft, said at an industry conference.

“What are they going to do when AT&T and MCI bundle software with their long-distance packages?” Siegelman said.

AT&T last month began to roll out its Interchange on-line service and MCI offers Internet and e-mail services.

Steve Case, president of America Online Inc., said Microsoft will be tougher to compete with because its Windows operating software is used on most new personal computers.

“They’re the only company - if they bundle in this exclusive and exclusionary way - that can be ubiquitous,” Case said.

“They clearly have a monopolistic position,” he said.

The debate at the Interactive Service Association’s annual conference was the second time this year that the leaders of the major on-line companies have argued their differences publicly. They also did so at a conference in New York in February.

Since then, the Justice Department began an investigation of Microsoft’s plan for potential violations of antitrust laws, but hasn’t decided whether to file a case.

If the plan goes forward, Microsoft Network would be available at the push of a button to the vast majority of home computer buyers, a huge advantage in a business where attracting novices is key to growth.

America Online, CompuServe and Prodigy distribute their access programs by paying PC makers to preinstall them, selling them in stores or giving them away in magazines.

“All we’re asking for is a level playing field,” said Edward Bennett, president and chief executive officer of Prodigy Services Co., another leading on-line firm.

Also appearing on the panel was Robert Massey, president and chief executive officer of CompuServe, and representatives of several smaller on-line services.

Siegelman said Microsoft is going ahead with plans to include the on-line software with Windows 95. “We don’t worry about what might happen,” he said.

CompuServe has 3.2 million subscribers, followed by America Online with 3 million and Prodigy with 1.6 million.

Industry analysts say Microsoft could get 2.5 million to 9 million subscribers in its first year.

Siegelman said such estimates were “laughable.” He said the company would consider Microsoft Network a success if it attracted 1 million customers in the first year.