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How big is Netscape's win?

Netscape scored big points in its deal with five phone companies but may still face an uphill battle from Microsoft, which has signed up virtually all the leading ISPs.

Netscape Communications (NSCP) today made an aggressive bid to fortify its dominance in Web browsers, unveiling a marketing agreement with five regional phone companies to make Navigator the preferred browser for their Internet access services.

But in the long run, Netscape may still face an uphill battle against chief rival Microsoft (MSFT), which has sewn up distribution deals with virtually all of the leading Internet access providers, including America Online, Netcom, and AT&T.

Under today's deal, Ameritech's (AIT) Interactive Media Services, Bell Atlantic (BEL) Internet Solutions, BellSouth (BLS), Pacific Telesis's (PAC) Pacific Bell Services, and SBC Communications (SBC) will all make Navigator the default browser users receive when they sign up for Internet access services.

The Baby Bells, as they are called, have all launched or are soon to launch Internet services that they are marketing to their traditional telephone customers, which number some 72 million consumers in 26 states. Today, executives of the phone companies declined to estimate the combined number of subscribers to their Internet services, but they have only a fraction of the Internet customers that veteran ISPs and long distance carriers already have.

Pacific Bell, for example, has more than 51,000 subscribers for its Internet service, according to Mark Fisher, general manager and marketing vice president for the company. In contrast, AT&T, which has agreed to deliver Microsoft's Internet Explorer 3.0 as the default browser to its WorldNet service, has nearly 500,000 subscribers.

Still, Netscape retains a commanding lead in the browser wars, with most estimates giving Navigator a 75 percent share of the market. But analysts expect that figure to change quickly as Microsoft's bundling arrangements take effect.

"The benefit for Netscape is...stopping the perception that they've lost the battle," said David Smith, research director for the research firm Gartner Group. "All the news that's come out about bundling [browsers with Internet services] has been Microsoft, Microsoft, Microsoft."

"It would be very optimistic if there were 2 million customers out of this whole thing," said Clay Ryder, senior industry analyst with Zona Research. "I don't think this will make a real significant impact. I think it helps the Bells more."

Indeed, phone company executives today said that their decision to bundle Navigator with their services was based partly on a new service that will advertise their Internet services on the heavily trafficked Netscape Web site.

As part of its deal with the phone companies, Netscape has launched ISP Select, a service that will allow consumers to sign up for Internet access from the regional Bell in their area. The site will also feature other ISPs besides the Baby Bells but will heavily promote the phone companies, according to the company.

Users who sign for Internet access with the phone companies will also receive free access to Netscape InBox Direct, a service that automatically delivers Web pages to a users email box.

The Bells said that their customers are demanding Navigator more than any other browser. "It is a customer-driven decision," said John Robinson, president of BellSouth.net Internet service. "The consumers, to a large extent, have chosen Netscape. They continue to use the Netscape product at a 75 percent share clip."

Netscape and the Bells both declined to discuss financial details of the bundling arrangement. The telcos will still offer Internet Explorer to their customers as option, though Microsoft's browser will not be the default for their services.

In recent months, Netscape has attempted to deemphasize the importance of browser market share figures, but today's deals are a sure sign that the software firm does not want to neglect its standing with consumers, even as the company devotes most of its energy to creating and marketing products for the corporate market.

Some analysts said today's announcement indicates that Netscape is still heavily invested in retaining its browser share lead.

"The conventional wisdom about the browser battle being over is dead wrong," Gartner's Smith said. "It isn't possible for Netscape to succeed as a server-only company. There are affinities between the [Web] client and server that make the utopian division between the two not possible."