UK Online, launched last week, and backed by Olivetti Telemedia, is a tailored service comprising UK-originated news, information, and entertainment including lifestyle sections, games and education.
"Unlike other service providers, such as CompuServe, we really are going after the home market - the mass market," says Jennifer Perry, the sales and marketing director of UK Online. Unlike Microsoft Network, the service is aiming at families, and every on-line subscriber will be based in Britain.
UK household expenditure on personal computers continues to rise: pounds 1.6bn was spent on home PCs alone last year, and there are now 3.9 million of them in UK homes.
However, until now the Internet has been seen only as a hobby for computer buffs, Ms Perry believes. "We are clearly positioning ourselves as a mass market consumer product."
British content is key. Research shows 64 per cent of UK families would prefer British to US content."Creating a sense of community is essential," she says, to avoid subscribers logging off after the first subscription.
Through a deal struck with Energis, the telecommunications arm of the national grid company, UK Online is available to 40 million people for the cost of a local phone. A user with a PC and modem can subscribe direct through UK Online, using software designed for the first-time user. All aspects of the service are covered in a flat fee.
Family membership costs from pounds 9.99 to pounds 14.99 per month, which includes full Internet access. The price includes four individual E-mail addresses. Each user has his or her own identification code, and parents can restrict the amount of time spent by children accessing the Internet.
Research shows 70 per cent of adults worry that children might access adult material on the World Wide Web. UK Online offers parents the ability to restrict the range.
UK Online has struck 35 partnerships with companies and organisations to provide information and entertainment on-line. These include deals with Dillons, Sony, Great Universal Stores, United Newspapers, Dennis Publishing, and Compton's Interactive Encyclopedia. None is being charged to take part.
Other on-line services have allowed commercial applications to dictate editorial content, Ms Perry claims. "We just don't see true commercial transactions yet being feasible. Charging information providers will come 12 to 18 months down the line. For the time being our focus is building the medium." It is a question of building confidence, she says.
UK Online is now distributing its access software free as part of its launch subscriptions drive. It aims to move to the mass market within six months, and attract 20,000 subscribers by Christmas and 100,000 in a year. Ms Perry says: "We want quality, relevant content and to work with partners to gain access to their databases and establish business models for future marketing initiatives."
Compton's NewMedia, a US company that produces Compton's Interactive Encyclopedia, has struck a deal with UK Online. It produces an interactive encylopaedia on CD-Rom and will use UK Online to update its customers. The 1996 edition will allow users to go on-line to access continually updated data.
Compton has a similar partnership with America Online in the US. "UK Online's family positioning completely matches our own," says Ciaran Brennan of Compton.
This model has significant future potential for any business needing to convey large volumes of visual information or time-sensitive data, says Ms Perry. "Should travel companies bring out brochures on CD-Rom, a link to an on-line service such as ours enables users to get up-to-date flight details, prices and last-minute bargains."
Dillons was also eager to experiment on-line, although is yet to sell books in this way. Instead, it is offering UK Online a regular feature with top-selling titles and reviews. Meanwhile, Sony and Olivetti are creating on-line competitions to gather subscribers' details for database marketing. And Great Universal Stores is to launch a home shopping service this year.
GUS Home Shopping has sold products on-line for the past 15 years - initially through BT's Prestel service, more recently with CompuServe and MSN.
"UK on-line services to date have been Anglicised versions of those from the US," says John Andrews, the research controller of GUS Home Shopping.
"UK Online is obviously appealing because of its British content. However, future development will depend on how other services develop their own content."
Microsoft Network is now available in 52 countries with access software in 26 languages. But it emphasises the international reach of its British contingent of software providers - including Barclays Bank, Tesco and Thomas Cook - is a key part of MSN's proposition.
UK Online will not have the field to itself much longer. America Online has confirmed plans to launch in Europe next year and with local services also planned by Europe Online, backed by AT&T and BT, competition will become tough.