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October 17, 1995

POOR EUROPEAN SERVICE TO BLAME FOR MICROSOFT NETWORK’s HIGH UK PRICES

By CBR Staff Writer

Microsoft Corp has blamed backward European telecommunications systems for the extortionate charges it makes in the UK for its Microsoft Network (CI No 2,740). UK pricing for the Network will use three different groupings: charter member annual plan, member annual plan and monthly plan. The first 500,000 charter users are being offered a discount on standard monthly charges if they sign up for a year at ú55. The average member annual plan costs almost ú60 a year, while the monthly membership costs ú6.00. All users will be granted two free hours of use a month, with each additional hour costing ú3.25. This compares with the US prices, in sterling equivalents, of ú24.96 for the annual plan; ú31.21 for the average member plan; just over ú3 for monthly membership; and ú1.56 an hour for additional time. US subscribers get three free hours a month on all the plans. Petra Gartzen, an on-line analyst at Dataquest UK, said Microsoft’s charges were much lower in the US because it was using UUNet Technologies Inc – in which Microsoft is a major shareholder – to access the Internet, while it had not yet decided on an Internet access provider for its European supply. Consequently, users of the Microsoft Network would be using British Telecommunication Plc’s X.25 low-level networking protocol that is a lot more expensive than IP. UK charges would come down quickly once Microsoft decided on an Internet provider, she said. But Microsoft said prices would never come down as far as Ms Gartzen suggested. Phone companies in Europe are not nearly as sophisticated as those in US. The monopoly of British Telecom has meant it can charge almost any price it wants while in the US fierce competition has cut prices to a minimum. We think (the charges) will come down but they will never be as cheap as the States. The company is currently working with Internet providers across Europe to form a network based on the cheaper IP protocol. It would not name the providers in question. Microsoft said it was not planning to profit from the call charges, but these calls have to be paid for somehow. In an ideal world we would not charge anything for connection. If we make enough money from the content providers we would do away with (the charges). A benefit of the excessive charges to Microsoft is that critics can hardly charge it with both seeking world domination with the Network and pricing it out of the market.

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