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March 15, 1996

Traffic Jam Clogs AT&T's Information Highway

BRIDGEWATER, N.J. -- If you wanted to get on the information highway Thursday via AT&T, you first had to drive along Route 202 to a jam-packed parking lot in this Central Jersey town.

More than 5,600 people gathered at an AT&T office building here on a sun-drenched morning to munch hot dogs, swap tales about cyberspace and watch as AT&T flipped the switch on its new Internet-access service, called Worldnet.

Mostly, though, they lined up for the free -- but exceedingly scarce -- computer software that is necessary to actually sign on to Worldnet.

Since AT&T announced its low-cost Internet service Feb. 27, the company has been so swamped with orders that it has been unable to ship the start-up software to most of the 212,000 customers who have requested it so far. So to assuage at least some of the impatient, AT&T threw an old-fashioned grand opening, complete with balloons, bunting and a high school marching band.

Drive out, AT&T promised in local newspaper ads and voice-mail invitations to hundreds of New Jersey residents, and you could be among the first to get a free copy of the coveted software. (The automobile was not the only technological throwback with a key role in AT&T's cyberfair; the voice mail was sent out by Western Union.)

Despite the sunshine and jaunty spirits, AT&T is learning a hard lesson about the explosive, unpredictable growth of the Internet. Though it offers telephone service to 90 million customers in the United States and is one of the world's consummate corporate marketers, AT&T has been surprised and staggered by the demand for its Internet-access service.

AT&T even managed to run out of supplies Thursday, after stocking more than 5,000 copies of the software and giving local consumers little more than a day's notice of the event. A spokesman said AT&T would mail copies of the software to the 253 visitors who went home empty-handed.

"This is crazy, but it's typical of this industry," said Alvis Pauga, a technology consultant from Franklin Lakes, N.J., normally a 45-minute drive south to Bridgewater. He clutched a plastic bag containing his software as if it were a carnival prize.

Pauga said he signed up for Worldnet as soon as he had heard about it, but an AT&T customer-service agent had told him that the company could not put him on line for up to a month because of the tremendous demand.

If AT&T executives were concerned about their miscalculation, they did not show it. "We are excited to see the response; it underscores the importance of this new industry," said Alex Mandl, president and chief operating officer of AT&T, who told the crowd that AT&T would make the use of on-line services as routine as a telephone call.

But industry analysts said that AT&T, by so far providing the Internet equivalent of a busy signal, might be making a costly misstep in its latest -- and most ambitious -- foray into the on-line business. With so many other companies offering access to the Internet, analysts said, irritating one's customers, even for a short time, is risky.

AT&T said the more than 200,000 requests for Worldnet software to date had exceeded the company's expectations fourfold. And yet, that demand has been stoked by AT&T's own lofty projections when it announced Worldnet late last month and said that its initial target audience was the estimated 20 million of its long-distance customers who already have computers and modems.

The company has also said that it would offer the Worldnet service to each of its 90 million business and residential telephone customers.

The company is offering unlimited access to the Internet to its long-distance customers for only $19.95 a month -- or up to five hours of on-line time free a month for the first year. Hence the stampede among the modemed masses.

"With a company like AT&T, the impact of slipping up is a whole lot bigger than if Netcom were to have a busy signal for 24 hours," said Greg Wester, the director of Internet research at Yankee Group, a telecommunications consulting firm based in Boston.

Wester was referring to Netcom On-line Communications, a company in San Jose, Calif., which is one of the larger among the hundreds concerns that offer Internet access to customers who own PCs and modems. Wester said that on-line users tended to be more forgiving of these companies because they are often start-ups with lean staffs.

And even more well-established companies have tended to tiptoe onto the Internet. Microsoft Corp., for example, played down the introduction of its on-line service, the Microsoft Network, last year because it did want to generate a flood of subscribers -- who might end up disappointed by erratic service or sparse information offerings during the early going.

Microsoft even put a initial cap of 500,000 subscribers on the service. Since then, the Microsoft Network has gradually grown to 800,000 subscribers, and Wester said the service has won generally high marks for its reliability and service.

In fact, AT&T executives, who had originally said that they would offer the service to anyone who wanted it by March 14, now explain their software scarcity as a deliberate strategy.

Tom Evslin, the vice president of AT&T Worldnet Services, said the company was worried about letting too many customers onto the network all at once, because it was determined to offer an on-line service as reliable as its long-distance telephone service.

Evslin said that AT&T could ship 100,000 copies of the software a day if it chose to. But he said the company intends to send out the software in a trickle the next month. And that will be software kits only for people who use Microsoft's Windows operating system on their computers. AT&T has said that a version of its Internet-access software for Apple Macintosh users would not be available until summer.

Although the prime selling point of Worldnet is its low-cost access to the broad Internet, AT&T has developed its own editorial content for the service. One service, called At Home, will feature Web sites that focus on topics like leisure, education and family. Another, called At Work, will offer financial news and investment information.

AT&T also recently announced an alliance with America Online, the nation's largest commercial on-line service. Under the terms of the deal, AT&T's Worldnet subscribers will have access to America Online for reduced rates, starting next summer.

Among the select few who have actually sampled AT&T's Worldnet so far, reviews are positive, although with a few caveats. Andrew C. Everett, who has been an experimental user, or "beta tester," of the service before it began full-fledged operation Thursday, said that setting up his Worldnet account was easy -- until he tried to change his E-mail address.

He called the customer service and technical support lines, which were unable to solve his problem without canceling his account and starting over, he said.

"I think I'm fairly computer literate, and even I had to call technical support," said Everett, who lives in Wellesley, Mass., and used to manage computer trade shows. "If AT&T is going after the low end, mass market, they're going to be facing a nightmare."

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