Yahoo!, MCI join to take on AOL Companies entering venture to provide Internet service


January 13, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

In a bid to challenge America Online Inc.'s dominance of the residential Internet market, MCI Communications Corp. is joining forces with the nation's most popular Web searching service.

MCI and the Internet directory firm Yahoo! Inc. announced yesterday that they have entered an agreement to market a new Internet service. The service, to be called Yahoo! Online Powered by MCI Internet, is expected to be available nationwide by the end of March.

The service will be pitched to a huge market -- Net newcomers.

lTC Jeff Mallett, Yahoo!'s chief operating officer, said, "Fifty million new users are expected to come to the Web in 1998. We feel what we're putting together jointly is the easiest setup for getting connected. The new user coming in here will be able to get the best, easiest service for getting access on the Web, period."

Currently, one can get access to Yahoo! only through another Internet service provider, or ISP, such as America Online. The deal between Yahoo! and MCI creates a new ISP that will give customers immediate access to Yahoo!'s Internet directory and to its own news, travel and financial services.

The deal brings together two companies that already are important Internet players. Washington-based MCI, better known for its long-distance telephone services, has become a major ISP and has developed an extensive Internet network. In its four years of existence, Yahoo!, of Santa Clara, Calif., has become the top search service on the Web, with more than 26 million users each month.

Yahoo! and MCI declined to discuss the financial details of the partnership and said the cost of the service has not yet been decided.

Henry M. Blodget, an analyst for CIBC Oppenheimer Corp. in New York, said the deal works well for both sides, and could have repercussions for at least one other Internet company: "I think it's great for Yahoo! and smart for MCI, but the company it has the most impact on for the long term is America Online. AOL is virtually unchallenged in the residential market."

In September, Dulles, Va.-based AOL struck a deal to take over CompuServe Corp., which had been its biggest rival. That transaction, expected to be finalized early this year, gives AOL 12.6 million subscribers, about 60 percent of the residential Internet market.

AOL spokeswoman Wendy Goldberg said, "This is a very competitive business. We certainly don't expect to be the only player in the market."

Blodget said the partnership gives MCI a chance to set its ISP apart. "Right now, MCI can't distinguish its service from all the others. After this, they can say, 'We've got Yahoo!' "

As for Yahoo!, Blodget said the deal gives them "more eyeballs." Since the company makes money from selling advertisements on its site, having more viewers could mean more cash.

Another winner in the deal could be WorldCom Inc., the Jackson, Miss., telecommunications firm that is trying to buy MCI. WorldCom has built a formidable business Internet network; Yahoo!'s partnership with MCI could give WorldCom greater access to the residential market.

Pub Date: 1/13/98

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