AT&T INTERNET SERVICE SOARS EARLY WITHOUT ADS;WORLDNET AD EFFORTS SET FOR NEXT MONTH WILL AUGMENT STRONG WORD-OF-MOUTH

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AT&T Corp. will sell ads on its new Internet-access business, but it's holding off running ads to promote the service until next month because of strong early word-of-mouth.

Just two days after announcing its WorldNet service last week, AT&T said it had already received more than 100,000 consumer inquiries.

WorldNet, launching in mid-March, will offer AT&T's 90 million long-distance customers 5 free hours of Internet access each month for the first year. The service's announcement takes the Internet a step closer to being a mass medium and puts pressure on other access providers to drop prices to remain competitive.

`SO COMPELLING'

"This offer is so compelling that word-of-mouth will spread it," said David Hood, VP-marketing, AT&T WorldNet Service. "Next month we'll do some print advertising and direct mail, blending it in with our other services."

The campaign, to carry the umbrella tag "Internet for everybody," will most likely be shared among AT&T core agencies Young & Rubicam, FCB/Leber Katz Partners and McCann-Erickson Worldwide, all New York.

AT&T also plans to stuff WorldNet promotions inside customers' monthly bills.

In addition to access, WorldNet will offer basic content in such areas as news, travel, weather and sports, opening up sponsorship opportunities.

"We plan to leverage the WorldNet brand through all our existing services," said Lane Bess, WorldNet product manager. "Flooding the market with free diskettes everywhere is not something we're interested in doing," he said, an obvious reference to America Online's marketing strategy.

However, the company is looking at bundling its Internet service with various software manufacturers. It has already struck deals to bundle WorldNet software within Broderbund Software and Novell products.

ONLINE TREMORS

The arrival of AT&T WorldNet has set off major tremors in the online industry.

"We didn't enter the market to cause a price war among access providers," Mr. Hood said. "AT&T wants to see the Internet market reach a critical mass and we think our brand and equity can help do that."

But other companies that provide Internet access-and their investors-are quaking.

RIVALS' SHARE PRICES DROP

Share prices of leading Internet access providers like Netcom Online Communication Services, America Online and UUNet all fell sharply after the AT&T announcement.

The number of access-only providers could dwindle from about 1,200 to a few hundred if they don't start strategizing to compete with big services with both marketing muscle and equipment ready for a high-traffic migration, said Gary Arlen, president, Arlen Communications.

"I could argue that the market would dwindle down into the hundreds" of services, he said. "If they find a niche, like local content, or form a partnership, they could compete."

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