THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, March 17, 1996 TAG: 9603150568
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Long : 174 lines
About a year and a half ago, Dave Turner and Bob Cady joined thousands of other American entrepreneurs in the latest technological gold rush.
They took some of the profits they had squirreled away from developing communications software for federal agencies and set up a Norfolk company called Jericho Junction. Its service: offering phone callers access to a rapidly growing global electronic information/entertainment bazaar known as the Internet.
One big obstacle appeared right away. When they called their local phone company to place a Yellow Pages ad under Internet services, the answer was: ``Sorry, it's not available.'' Internet access was such a new commercial service in 1994 that there was no such category in the book.
It's that kind of story that gets mom-and-pop Internet service providers chuckling when they ponder the latest big news in their fledgling industry: the announcement by AT&T Corp. earlier this month that it wants a piece of the Internet action.
AT&T rolled out its service, called AT&T WorldNet, last week. It offers the 90 million customers of the nation's largest phone company five free hours of Internet access a month and unlimited usage for $19.95 monthly. Non-AT&T customers pay $24.95 a month for unlimited access to the computer network.
Eventually, AT&T says it will make the Internet part of a one-stop shopping bill for all its services, including local, long-distance and mobile telephone, as well as satellite TV.
The AT&T development initially sent shock waves through the Internet-access business, which is populated by several thousand mostly small businesses in the United States. There are close to 20 such companies in Hampton Roads, most of them started in the past two years.
``It was like a big basketball thrown in a pool of tennis balls,'' says Gordon Borrell, a vice president of Norfolk-based InfiNet, one of the nation's larger access providers. ``It was bound to have a big ripple effect.''
But some in the Internet-services business say the real impact won't be as great as initially imagined.
To them, that any big phone company, let alone conservative old Ma Bell, thinks it's hip enough and fit enough to run with the fast-paced crowd in the Internet biz seems laughable. There are years and then there are Internet years, which pass about every three weeks.
Right now, this electronic hullabaloo takes a special breed to deliver successfully. Good Internet service providers spend a lot of time educating and re-educating their customers about changes - and filling never-ending potholes on the information highway, everything from software glitches to overloaded phone switches.
``AT&T, all the big guys are going to try to offer a rubber-stamp service, and not a lot of service at that. As big as they are, that's the best they'll be able to do,'' says Steve Haynes, president of ExisNet, a Virginia Beach-based access provider that Haynes says has grown from 125 to 1,500 subscribers since last June. ``I think when people find the limitations of that approach, they'll come to people like us in droves.''
To make his point, Haynes strides past a wall jammed with computers and phone wires in his cubbyhole of an office. He then introduces Nancy Wade, an associate professor of biological sciences at Old Dominion University. She was a computer novice before investing $5,000 in a computer system late last year.
The computer didn't come with all the software promised by the mail-order house. It took Wade three months of pleas and threats to convince the company's telephone customer-service reps that it was their fault, not hers, that her computer wasn't working.
An ExisNet technician, to whom she brought the computer in desperation, finally diagnosed and fixed the problem - and has spent hours walking her through the learning steps.
``They have saved my whole concept of this purchase I made,'' Wade says. ``I think this level of service is extremely useful for the novice.'' She says she can't imagine dealing with a national Internet-access provider now.
The giants of telecommunications, however, are not deterred by such stories. They're determined to make a mass medium of the Internet, which now has an estimated worldwide user community of only 30 million, give or take 10 million.
MCI got in the race about a year ahead of AT&T. Meanwhile, big on-line providers like America Online and CompuServe have been giving subscribers to their private networks an ever-widening back door to the Internet. On the sidelines Sprint, the regional Bells and big cable companies all are preparing to offer access, too.
In their own defense, the big guys say they're becoming more nimble and able to deal with customer needs. Competition has made them so, they say, and it's only going to grow more intense. Congress' recent passage of a landmark industry-reform bill will usher in a market free-for-all.
``We have a reputation and a standard to uphold and we will,'' says Karyn Vaughn-Fritz, an AT&T spokeswoman. ``We know there are a lot of people who may have been intimidated by the Internet and didn't know where to begin to get on it. We will be there for them.''
AT&T's rush to the Internet is the final validation of the global computer network, says Peter Krasilovsky, a senior telecommunications analyst for Arlen Communications Inc. of Bethesda, Md.
``They're assuming that this is a permanent fixture on our media landscape,'' he says. ``AT&T thought if it didn't go there now and establish itself as a major brand, it would lose out on a major branch of connectivity, one that just might evolve into our future television.''
To Krasilovsky, the dominance of Internet access by big players like AT&T is not a question of whether, but when.
Eventually, he predicts, major telecommunications providers will transform the Internet from a medium that's of interest to only a 10 percent segment of the population he calls ``information strivers'' to one that will appeal to ``information laggards.''
The latter comprise the majority of us whose main purpose in surfing the network will be fun. That means the Internet will be everything that TV is now and more, he says: a panoply of multimedia entertainment choices.
After the pending shakeout, there will only be room in the industry for Internet providers that offer a truly superior price/service value or niche products that are too much trouble for the giants to mess with, Krasilovsky predicts.
In their more somber moments, many Internet businesspeople agree.
``If consumers who sign up for AT&T's service are expecting an experience that is as easy as picking up the phone, not even AT&T can do that now,'' says David Richards, president of InfiNet. ``But over time, they're going to do it as well as or better than anyone else because they're going to put the most money into it.''
To cover its bets, Richards says InfiNet, which has 185 employees in downtown Norfolk, is developing a broad range of Internet-related business lines. That way the company's livelihood won't depend on consumers using it for dial-up access to the Internet.
InfiNet has identified newspapers as its customer niche. An increasing number of papers are trying to stake a claim in the on-line world. Many of these papers use InfiNet's computers to serve up their electronic content or license InfiNet's Auto Web and Real Estate Web services to sell on-line ads.
One InfiNet product now under development is a personalized on-line news service that local newspapers will sell to people in their communities.
The InfiNet focus was a natural because the company is co-owned by three companies with newspaper interests: Norfolk-based Landmark Communications Inc., parent of The Virginian-Pilot; Arlington-based Gannett Co. Inc.; and Miami-based Knight-Ridder Inc. Gannett, which joined the InfiNet partnership last month, and Knight-Ridder are the largest and second-largest, respectively, among U.S. newspaper publishers.
Together, the three companies own 130 daily newspapers in the United States.
Richards concedes that other Internet-service providers won't find niche-finding as easy. But he says it will be imperative for companies that depend upon selling consumers dial-up access to do so because prices for such services are dropping sharply, squeezing profit margins.
Some analysts predict monthly service charges ranging from $20 to $25 a month could be cut by as much as half in the next year alone.
Benjamin F. Loyall concedes he's spent some sleepless nights pondering such threats. Regional phone companies like Bell Atlantic Corp. worry him the most, says Loyall, owner of a small Williamsburg-based Internet-access provider called Widomaker Communication Services.
Nevertheless he's plowing ahead with an expansion. It will be five, maybe 10 years ``before everybody knows what the Internet is and when you'll get it as easy as getting breakfast in the morning,'' he says.
That'll leave time for providers like him to find a niche and establish a firm base of loyal customers. Loyall goes so far as to make house calls - ``three last week, alone,'' he says - to keep his subscribers happy.
His biggest challenge is keeping up with growth. Though he's covering his operating costs and has enough left over to buy new equipment, he hasn't yet begun to recover his $80,000 in initial start-up costs.
And time keeps slipping away. Loyall estimates he works 80 to 90 hours a week. With only two other employees, he's on-call nearly constantly.
``Don't start this business if you have a family or if there's anything on the side you want to get done,'' Loyall says. ``My wife named this business `Widowmaker.' '' He took out the second ``w.''
Over at Jericho Junction, Dave Turner is putting in long hours, too. AT&T isn't going to convince him to throw in the towel - not with 500 paying customers and lots of growth potential.
``There's a wave here,'' he says of the Internet business, ``so we're on our surfboard and we're going to ride it.'' ILLUSTRATION: Photo
David Richards
InfiNet president
Graphic
SOME LOCALLY BASED PROVIDERS IN VIRGINIA BEACH
[For complete graphic, please see microfilm]
by CNB