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MSN, Verizon set back DSL clock

The software giant pushes back the launch of a partnership with Verizon, a key element in Microsoft's efforts to combine its Internet software with broadband access.

Microsoft has pushed back the launch of a partnership with Verizon Communications, a key element in the software giant's efforts to combine its Internet software with broadband access.

The new service, which was slated to debut at the beginning of the year, is now expected to be launched sometime before the middle of the year. The agreement, announced last June, called for Microsoft to bundle its MSN 8 Internet service with Verizon's high-speed DSL (digital subscriber line) access. The deal is exclusive, allowing MSN to be the sole provider of consumer online services to Verizon's DSL customers.

Microsoft on Tuesday said the companies delayed the launch to work out some tweaks in the service's set-up and installation process. The Redmond, Wash., giant also wants to make some improvements in the overall product, although the company declined to mention specifics.

"We had a little more work to do than originally anticipated," said Bob Visse, director for MSN. "We recognize we're a few months from where we hoped it would be."

Verizon spokeswoman Bobbi Henson said the companies plan to launch the product in the spring and are working out final details involving registration and additional features.

"We're in the final stages of our testing, and we're making refinements that will benefit our customers," Henson said. However, she maintained that the product is not late to market.

The change in the release date comes as Microsoft reconsiders its plans for MSN. Like other dial-up Internet service providers, MSN has experienced flat subscriber growth due to the saturation of the market and the growing popularity of household broadband installations. MSN also faces competition from America Online and Yahoo, which are developing high-speed subscription services geared for broadband users.

Microsoft has thus far pinned its online hopes on MSN 8, an Internet service that bundles online services such as e-mail and instant messaging with dial-up access. Launched last fall, MSN 8 was touted as Microsoft's next step in chiseling away at the 35 million subscribers from rival America Online.

But like AOL, the overall slowdown for dial-up access has hit MSN 8. In January, Microsoft said it would scale back its marketing efforts for MSN 8 after witnessing flat subscriber growth during the fourth quarter of 2002.

Instead of spending the original $300 million marketing budget for its MSN 8 dial-up product, Microsoft said in January that it will use some of that money to promote its "bring your own access" product, which offers MSN 8 features without the dial-up access.

Meanwhile, Verizon is continuing to offer its DSL service to its customers and is hoping MSN will help drive adoption. Verizon on Wednesday said it will add 10 million new DSL lines to the current 36 million lines by the end of the year, offering service to 80 percent of its customer base.

Verizon said one of the catalysts to this move was the changing climate in telecommunications regulation policy. The Federal Communications Commission in February relaxed its regulations forcing the Baby Bells to lease their copper lines to DSL competitors, a move that Verizon said would help it accelerate its DSL push.