NETWORK : Virgin on the Net?

After records, air travel, vodka and cola, Richard Branson is setting his sights on cyberspace. By Stephen Pritchard

Last Thursday, Virgin joined the ranks of the more than 150 companies selling Internet access in the United Kingdom. For the entertainment-to- travel group headed by Richard Branson, it was an uncharacteristically quiet affair.

There were no balloons or stunts: just the staged roll-out of CD-Roms, boxed in yellow but with the distinctive Virgin label, in computer software outlets and Virgin Megastores. The disks offer a three-month free trial to the Virgin network. Mr Branson obviously hopes that word of mouth will make him a serious player in cyberspace.

Virgin is no stranger to computers: Virgin Interactive is one of the largest leisure software houses. The company tried, and left, the PC marketplace a few years ago and is now the largest European manufacturer of floppy disks.

Nor is Virgin a stranger to competitive or complex markets: witness its foray into air travel and, more recently, personal finance. But cracking the Internet will be a challenge, even for Virgin's marketing might. The field is crowded, revenues are unpredictable and customer loyalty thin.

Alex Dale, Virgin Internet's publishing director, hopes to tackle at least the latter by giving users a much higher level of customer service than they are used to. The company has a charter for its services, setting out in detail what Virgin surfers can expect (for example, the capacity of its links to the United States, or the number of users per modem). It has a 24-hour help desk; engineers can come to your home to set up your PC's Internet link, and the Virgin home pages contain a detailed guide to the Internet.

Virgin Internet is a joint venture with the telecommunications firm International CableTel; that the partners are serious is shown by an investment of between pounds 50m and pounds 100m over three years. The ambition is to reach the top five service providers in the UK.

Mr Dale believes that the Virgin brand name might be enough to persuade computer owners to pick up the disk for a free trial. The rest - winning paying subscribers at pounds 10 a month for unlimited access, or pounds 6 plus 2p a minute after five free hours - depends on the service living up to its promises. "The product stands up on its own two feet," Mr Dale says. "It would be a good product, even if it did not have the Virgin name on it."

On paper, the Virgin Internet technology looks impressive. Modems support speeds of up to 56,000 baud using a new protocol called x2, pioneered by US Robotics. The backbone for the system is provided by International CableTel, which already runs the network that broadcasts terrestrial TV and Vodafone's mobile phone signals. Virgin will trial cable modems in the second quarter of next year, and broadband radio by the end of 1997. Mr Dale describes this process as "developing an alternative superhighway to BT".

On the Internet itself, Virgin's strategy is a halfway house between services such as CompuServe or America Online, which charge by time online for their own bespoke content, and straightforward Internet service providers such as Demon or Pipex.

Virgin will provide its own content, three-quarters of which is in the public domain. The rest is restricted to Virgin customers, but there is no access charge for pounds 10 subscribers. Some of the content, Mr Dale admits, will flag other Virgin brands, though he stresses that sites will not be biased towards his firm's wares. Other services include Autonomy, an intelligent agent that searches the Net for users, and the search engines Excite and Muscat.

Content does not come free, so Virgin is looking beyond subscriptions for other sources of income. The first is likely to be transactions, according to Mr Dale: shopping online, with payments taking place over the Internet. The second will be advertising. Mr Dale is certain that the Internet will move from an information source and entertainment medium to include shopping. "At some point, people will buy their groceries over this," he predicts.

For now, though, his challenge is in meeting Virgin's goal of broadening the appeal of the Internet. "The Internet, as it currently exists, is good for enthusiasts," he says. Indeed, even computer users have not embraced the Net in the numbers the pundits predicted. Mr Dale suggests that much of the Net is hype and little action. "Eighty-five per cent of the country have heard of the Internet," he says. "Of that 85 per cent, only 10 or 15 per cent have any idea what it actually is."

Even among computer owners, a minority use the Internet. According to the company, as few as 10 per cent are connected, although 40,000 people come online each month.

Mr Dale believes that making the Internet easy to use will make a real difference. This is the reason behind the home installation service currently on trial, the help pages and the software package, as well as VAT-inclusive pricing. Would-be subscribers can even order a modem through Virgin.

Mr Dale likens the development of the Net to the growth of the phone system. When phones first came along, he points out, someone else had to connect calls. He must be hoping that a substantial number of the 40,000 monthly "newbies" will choose Virgin to connect themn