Announced in January, the combined service of Yahoo content and MCI connectivity will cost users $14.95 per month for a three-month introductory period. After that, Yahoo Online users will pay $19.95 per month unless they subscribe to MCI's long distance telephone service, which entitles its users to the $14.95 Internet access rate.
The service essentially will combine what consumers already can get separately: Net access from MCI and content available on the Web from Yahoo. But the companies will include a limited amount of proprietary content as well as a special interface and a customized Microsoft Internet Explorer browser.
MCI will continue to offer Internet access not branded by Yahoo, and will maintain numerous partnerships with content sites including MSN (which also provides Internet access and proprietary content for its members), Microsoft's Web TV, and Snap, which is published by NEWS.COM publisher CNET. Yahoo will continue to form distribution alliances with other ISPs.
Offering access to the Internet will provide Yahoo with an important tool that it currently lacks in its struggle to lure new Netizens away from America Online. The deal also will help Yahoo fend off other connectivity packages such as those offered by computer makers including Gateway 2000 and Acer America.
Analysts praised the offering as a valuable entry into the market, but said it would not pose a serious threat to AOL.
"It's a great offering. They're two strong partners with an interesting initiative," said Forrester Research analyst Chris Charron. "But on its own, Yahoo Online is not going to be the next AOL."
Charron--who noted that MCI's market share was around 2 percent and AOL together with MSN had well over 50 percent--said the best weapon Yahoo Online and other challengers now have is price. AOL last month raised its rates to $21.95 per month from $19.95 per month for unlimited access. And even though the $14.95 per month Yahoo Online rate has strings attached, Charron said it was still a significant draw for price-conscious consumers.
"Yahoo and MCI are going in one direction, and AOL is going in another," he said.
Under the deal, Yahoo will reap revenue from advertisers and merchants, while MCI will earn its money from dial-up fees. Terms of the deal were not disclosed, but executives said it was set for fewer than ten years.
The service currently is available only to PC users running Microsoft Windows 3.1 and Windows 95. The companies will consider adding a Macintosh-compatible version "if demand warrants," said David Trachtenberg, MCI's director of brand marketing.