INTERCHANGE ACQUISITION BOOSTS AT&T ONLINE PORTFOLIO

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With its recent purchase of Ziff's Interchange Online Network, AT&T is staking a big claim in the online market.

AT&T late last month paid a reported $50 million to acquire Interchange, an online service now in test. Interchange joins ImagiNation Network, an entertainment-oriented service, and PersonaLink, a network for handheld personal communicators, in AT&T's online portfolio.

But AT&T says it doesn't plan to merge the three into one giant service. Instead, Interchange will fall under AT&T's Business Communications Services group, while the other two are part of the new Consumer Interactive Services unit.

"We are exploring how these services evolve, and the online business is changing very rapidly and dynamically, so it's impossible to speculate," an AT&T spokesman said.

Interchange has been testing with 10,000 computer users since November, with a full commercial rollout planned for later this year.

The only content providers participating in the test are Ziff's Interchange Computing, a special-interest area, and the Washington Post Co. Future content providers include the Minneapolis Star-Tribune and its sister company Cowles Business Media.

AT&T says it doesn't view Interchange as a typical online service like Prodigy or America Online. Instead, Interchange will be the platform from which content providers build their own online services.

Though pricing formulas have not been established, the arrangement potentially could be more lucrative for content providers than other online services because users will pay to access each special-interest area.

"Users will pay a fee to access the service, but each publication will have its own customized price for subscribing electronically," said Lisa Landa, Interchange marketing communications manager. "Pricing will vary according to each publisher's needs as it distributes content for profit, offsets the cost of content with advertising or develops other relationships with users."

But some observers aren't sure consumers will pay a premium price for such material.

"Nobody knows when online services are going to make money for the content providers," said Jack Edmonston, editor of the newsletter Computer Advertisers Media Advisor. "There is still a big question over whether it is going to be an advertising-driven business or a content-driven business."

Those concerns and the looming intervention of Microsoft Corp. into the online market later this year may have deflated Interchange's $50 million sale price. The figure is half what investment banker Lazard Freres & Co. was hoping the unit would fetch for the Ziff family.

The Interchange deal marked the fourth and final piece of Ziff Communications to be sold and pushed the total breakup price of the family-owned company to more than $2.13 billion. Forstmann Little made off with the biggest piece, paying $1.4 billion for Ziff-Davis Publishing Co.

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