Microsoft, Verizon Ink Deal for Co-branded DSL

In a deal that will catapult MSN into a leading role in the broadband arena, Microsoft Corp. forged a strategic alliance with
Verizon Communications to roll out a co-branded DSL service beginning early next year.

When it is unrolled, the “Verizon Online with MSN” service will be available
to all Verizon Online DSL customers and MSN Broadband Internet Access
customers located in Verizon’s network. Verizon’s network footprint covers about 34 million homes.

“The key goal for both of our companies is to put a service in the
marketplace to make it easy for people to sign up for broadband,” said
Microsoft CEO Steve Ballmer. “Everybody can talk about the unrealized
potential of broadband. I think there’s 40 percent of households who don’t
have broadband but should.”

Customers can sign up for the service with either Verizon or Microsoft, with
either company handling the billing and service. The companies did not set a
price for the service. Financial terms of the deal and its duration were not
disclosed, but Ballmer said it was a “long-term” agreement.

“We have put ourselves in the position to really deliver on the promise of this
digitized world by having a partner like Microsoft,” said Verizon CEO Ivan
Seidenberg.

Verizon, the largest U.S. phone company, currently has 1.4 million DSL
customers, while MSN has 7.7 million dial-up customers. Microsoft said the
alliance, along with a five-year
pact it struck
with Qwest Communications in April 2001, gives it the
ability to serve half of the DSL market in the U.S.

According to a recent study by
research group TeleChoice
, the United States had 4.8 million DSL
customers at the end of the first quarter, growing 12 percent from the
previous quarter.

With this deal giving Microsoft access to about a third of the nation’s
potential broadband customers, Ballmer said it would continue to ally with
cable companies
and other high-speed Internet access providers.

“There’s still two-thirds of the U.S. we have to figure out to serve in a
great way,” he said.

The deal will deepen Microsoft’s relationship with Verizon. Microsoft and
Verizon Wireless signed a
deal last month
to jointly develop and market wireless data services
with the “VZW with MSN” service. Since its launch, Microsoft said VZW with
MSN has attracted 300,000 subscribers.

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