Retail giant WH Smith launched itself into an already tightly-packed market last week with an online service offering free Internet access to schools - and watched its stock-market price rise 5 per cent in a day.

A similar project launched in February by Voss Net boosted its shares by a third, and the unlisted BiblioTech is also looking to muscle into the market.

All the initiatives claim to be free to schools and are advertised as efforts to give children access to a vital new educational tool. So, what are the city dealers getting so excited about?

Tim Blythe, corporate affairs director at WH Smith, admits his company has its eye firmly on the balance sheet.

“We have realised that we are in a position really to build in the field of education,” he said. “All our market research shows that there is a huge amount of trust in our brand in education, in the same way that there is with Boots in health.”

Not everyone agrees. Richard Millwood, a researcher on Anglia Polytechnic University’s Ultralab project and an experienced observer of the technology market, urges caution.

“WH Smith has made a half- baked effort and the clear link to the national curriculum is not there. There are references there but they are not clearly thought through,” he said.

WH Smith has sent out a CD-Rom providing free Internet access to 6,000 secondary schools and is selling the discs to parents for 50p each in its stores.

Families are being tempted with sweeteners such as a year’s free use of Cyber Patrol, a filter which allows parents to vet their children’s Internet viewing, and use of the Hutchison Family Encyclopedia.

According to Ultralab’s Richard Millwood: “Over the next 18 months we can expect schools all over the country to be connected to the Internet through their local authorities’ National Grid for Learning schemes.

“These CDs might be interesting to give to parents, they may be useful, but I can’t really see the school itself basing its system on them.”

Ashley Thomas, a financial analyst at SG Securities, says WH Smith wants to create a difference over competitors like Freeserve. “If you are a family, you are unlikely to have two Internet connections and if you have kids the WH Smith site may be very attractive.”

With thousands of adults and children thought likely to access the Internet via its site, WH Smith expects to make money through advertising and marketing on the net, according to Mr Thomas.

By contrast, companies like Voss and BiblioTech are trying to carve out their own niche in the market through offering high-quality education services which do not bombard families and schools with advertising promotions. They intend to make their money from a share of the telephone traffic generated by their servers.

Responding to criticisms of the WH Smith site, Mr Blythe said: “We have launched the site. It’s only the start. We will continue to work with the Department of Education and Employment to develop it.”