Microsoft Corp hailed a string of muscle-bound alliances with the likes of Deutsche Telekom AG a few months back to give the impression that it was unstoppable in the on-line delivery business, but deep-rooted tensions have emerged in one of those tie-ins, its $23m on-line venture with Australian state telephone company Telstra Corp, resulting in talk of changes to shareholder arrangements and future alliances between Microsoft and other media players. The joint venture, On Australia, was set up between the two to provide cheap, fast Internet access for Microsoft users. Australia is seen as Microsoft’s test-bed for its on-line Microsoft Network, launched in August, and On Australia is Microsoft’s only worldwide joint venture with a telecommunications carrier. However, Telstra is in no hurry to cut the price of ISDN Internet access, which Microsoft sees as crucial, and this has led to a number of high-level meetings, with Telstra’s chief executive Frank Blount and Microsoft director of advanced technology Daniel Petre trying to find common ground, according to the Australian Financial Review. Telstra is the sole provider of ISDN in Australia. Also causing alarm within Microsoft is the news that Telstra is in advanced discussions with IBM Corp over a new alliance which could threaten the flagship status accorded to On Australia. It is understood that IBM – through its joint venture with Sydney-based property developer, Lend Lease Corp Ltd – will be the retail arm for Telstra’s Internet services. Negotiations are continuing on a more substantial alliance between Integrated Systems Solutions Corp Ltd, 35% owned by Lend Lease, and Telstra, which could give Telstra access to the IBM Global Network (CI No 2,800). Political tensions have emerged, too, as the Australian Minister for Communications is to be briefed on the On Australia affair. This issue is assuming critical importance because from next month subscribers to On Australia will be able to access a full range of Internet services, in addition to the services provided from the Microsoft Network. While there is no suggestion that On Australia will be dissolved, the problems highlight one of the most complex issues facing the information and communications industries today, that of merging carriage and content, with content providers trying to force down the price of ISDN as carriers try to maintain margins in their core business.
