Upgrade soon: watch this cyberspace

The mighty Microsoft has had to rethink its online strategy. Andrew Orlowski explains why

MSN, the Microsoft Network, has been the most talked-about online service in the past year. It was launched in August alongside Windows 95 and caused near panic in the online industry. All W95 users had to do was click on an icon, and they could automatically sign up with MSN. This led to fears that Microsoft would gain not only a dominant share of the commercial online services, but would also be able to dominate the Internet.

Opponents, led by CompuServe and America Online, repeatedly requested the US Department of Justice to look at MSN. Even the veteran consumer rights champion Ralph Nader petitioned for MSN access to be unbundled from the operating system. The investigative author Andrew Schulman meanwhile declared that the "Registration Wizard" software activated on sign-up raised anti-competitive issues. The software searched users' hard disks for more than 100 programs, including CompuServe and AOL applications, and sent the details back to Microsoft.

Six months on, it appears doomsday has been postponed. Far from "putting its muscle around the windpipe of the nation", as CompuServe's Bob Massey memorably declared, Microsoft has been forced to regroup. UK users have discovered poor connections, high prices and a comparatively weak content: here, MSN offers e-mail and Usenet, but not full Internet access.

As a result Microsoft will announce later this month that MSN is being relaunched in the UK in early April. Prices will come down sharply, there will be full access to the Internet, and there will even be electronic links from the service to the World Wide Web. Like CompuServe, it is trying to establish itself a gateway to the Net that also offers subscribers its own services.

The Network has made a dramatic shift since Bill Gates's announcement last December that Microsoft was now taking the Internet seriously. Now the focus is on providing fast, competitively priced Internet access. Judy Gibbons,. the company's UK director, denies that her chairman's announcement took them by surprise: "Nobody a year ago could see how big the Internet was going to be," she says.

The current service is very tightly integrated into Windows 95: right from the sign-up process, MSN looks and feels like another part of Microsoft's Office 95. There are some very slick touches. You can click on icons that arrive in mail messages, and a software upgrade will automatically be installed. The innovative V-Chat forums, currently in beta testing, provide three-dimensional "rooms", complete with sound, in which you can chat.

But the bad news outweighs the good. For start, a PC needs 16mb of memory to run MSN smoothly. Few of the promised content providers have materialised. And MSN has an American slant: news is provided from the US, and some of the UK content such as "The Village Green" and "The Irish Village" has a Disney-like flavour.

At 14,000 bits per second, access can be painfully slow, and downloads longer than a few seconds are terminated. This problem should be solved as the company moves from an X.25 network to a standard Internet feed from Pipex.

But no one should ever write off Microsoft. Ms Gibbons believes that high investment in support and ease of use - boasting "one-button" access to the Internet, no sign-up fee or additional software - will be the key to "New MSN's" success. "You can't demand membership - and you can only provide it if you're offering demonstrable value to the user," she says. An aggressive promotional push will see member-only portions becoming publicly accessible. The "club" and the Internet portions will also be uncoupled, allowing users with an existing Internet account to become MSN members at a reduced price. Microsoft is also keen to develop less- intrusive online ads, and to take a percentage from commercial transactions.

MSN 0345 002000. Subscription pounds 5.99 a month, including two hours' use a month, then pounds 3.25 an hour. Price likely to fall soon.