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Yahoo wants businesses at high speed

The company is expanding its broadband agreement with SBC to include a high-speed Net access service aimed at small businesses. But will customers bite?

Yahoo and SBC Communications are expanding their broadband agreement to include a service for small businesses.

The companies, which teamed up in November to offer co-branded, high-speed Net access, said Tuesday that they plan to offer custom DSL (digital subscriber line) and dial-up services, premium Yahoo services, and other technologies to small businesses.

The services are expected to launch early next year and will compete with Microsoft's bCentral small-business initiative and AOL Time Warner's Netbusiness service.

The three Internet service providers have been fighting with competitors like EarthLink and other telecom companies to grab more broadband customers by converting dial-up users to high-speed services. The companies are betting their services will attract more business customers by combining high-speed services with small-business services.

"There's only so many paid services Yahoo can extract from the consumer market. They're going to have to grow up and target business customers too," said small-business analyst Mike Lauricella, of research firm The Yankee Group. The research firm estimates that there are around 6.2 million small to medium-sized businesses in the United States with at least 500 employees, and that only around 1.02 million of those have DSL service.

SBC and Yahoo's deal is evidence that "all service providers and dot-coms now know they have to team up" to appeal to that market, Lauricella said. Under the terms of the deal, Yahoo will get monthly per-subscriber payments from SBC and use of SBC's sales force and customer service people.

For SBC, the deal also marks a new foray into the small-business market. "For (a regional Bell operating company), this shows a serious focus on the small-business market. SBC has traditionally been focused on consumers and large companies," Lauricella said. The deal gives SBC a share of revenue from advertising and e-commerce.

The new service will offer DSL access wrapped up with Yahoo's pre-existing small-business products, including business-class e-mail, domain name registration, a self-service advertising program to place adds on the Yahoo network, and financial reporting functions. The companies said they plan to promote the service through marketing campaigns. They also will try to persuade existing SBC small-business customers to use the new service.

Yahoo said it has a billing relationship with over 350,000 small businesses, but it declined to say how many of those are subscribers to its business services. The services have been available for five years, but Yahoo relaunched them from a central Web site Thursday. The company said the reorganization will help it better promote the services by making it easier for small businesses to find the technologies they need.

The decision to expand offerings via DSL rather than cable also marks a strategic move for Yahoo as it migrates into multimedia services and programming. Yahoo sees DSL as a way to gain a foothold in broadband content.

"We have a great interest in the next generation of services with entertainment applications, so a company like SBC makes sense, because unlike cable providers with interests in the entertainment industry, SBC will let us take the lead in programming," said Jim Brock, senior vice president of major initiatives at Yahoo.

Yahoo said that it and SBC have just started launching the co-branded broadband services they agreed to in November and plan to make those available in all of SBC's service areas over the next few months.