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February 27, 1996

AT&T to Offer Internet Access to Millions


SAN FRANCISCO, Feb. 26 -- The AT&T Corporation will provide details on Tuesday of a new service that it hopes to use to link millions of its long-distance telephone customers to the global computer network.

Analysts said the entry by AT&T, the largest telecommunications company in the world, was certain to alter the competitive landscape in the market for Internet service providers, which is now made up of more than 1,000 small and medium-size companies.

AT&T plans to offer relatively inexpensive dial-up access to the Internet and the World Wide Web to personal computer users at home. Company officials said they would not disclose their pricing strategy until the press conference, but they said the service, called Worldnet, would be available commercially within days of the announcement.

Internet service now generally costs $15 to $35 a month, with an additional hourly charge in some cases. The AT&T service will have a relatively low introductory price, and there have been industry reports that it might also charge a flat monthly fee for unlimited use -- a feature sought by many consumers.

"We think we'll be aggressive enough to make the industry sit up and take notice," said Kevin Compton, an AT&T spokesman. He said the company was planning to conduct its press introduction at a New York City diner to underscore the point that the service is aimed at individual consumers and not businesses.

AT&T is also discussing contracts with the nation's largest on-line service providers to provide Internet services in an effort to quickly position itself as one of the major players, according to several people familiar with the negotiations.

Many small Internet providers now also offer additional services, such as providing storage space for World Wide Web pages for small businesses and for individual customers. However the smaller mom-and-pop Internet providers will be hard pressed to compete with the marketing muscle of AT&T, which has 80 million residential and 10 million business customers for its long-distance service.

AT&T had originally thought that it would be able to promote a proprietary on-line service like Compuserve, owned by H &ÝR Block, or America Online, rather than an Internet access provider. One of AT&T's first steps into the consumer marketplace was the purchase of the Interchange on-line service from the Ziff Communications Company for $50 million. However, the acquisition occurred just as the Internet market was picking up momentum and as private on-line services were dropping their barriers and connecting their subscribers to the Internet. AT&T now plans to phase out the Interchange service.

Recently, AT&T shifted its focus to products and services directly linked to the Internet.

"You're about to see a new AT&T," said Gary Arlen, president of Arlen Communications in Bethesda, Md. "They learned something from the Interchange debacle. They now believe they have to grab market share while they have the chance."

The rush to gain market share in the last year has been felt most by the midlevel Internet service providers, like Performance Systems Inc., Uunet Technologies, Netcom On-Line Communication Services Inc. and BBN Planet, a division of the BBN Corporation. All four companies are scrambling to expand enough to survive a shakeout, which has been widely forecast.

AT&T's entry into the Internet market is certain to be followed by many of the regional Bell operating companies. Pacific Bell plans to introduce its consumer service later this year.

AT&T has said that Worldnet will include a customer version of the Netscape Communications Corporation's Web browser and a search tool that has been designed by Verity Inc., an information retrieval company based in Silicon Valley.

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