MSN LURES AOL CUSTOMERS WITH INTERNET-ACCESS DEAL

In response to America Online’s announcement last week that it was raising the rate on its flagship service (hitsdailydouble.com, 5/23), MSN has launched a $50 million campaign designed to persuade AOL customers to jump ship.

MSN’s new nationwide campaign will offer three months of free Internet dial-up access and a $21.95 per month price guarantee through Jan. 1, 2003, to consumers who switch by June 30.

MSN, naturally, is owned by computer giant Microsoft. It’s what the "M" stands for.

Since AOL’s announcement that it was upping its price from $21.95 to $23.90, MSN call centers have received 50% more inquiries from consumers who are looking for an alternative to AOL. Since that information comes from MSN, you know the numbers aren’t padded at all.

"Immediately following AOL's price hike last week, we received thousands of calls from AOL customers looking for an alternative," said MSN VP Yusuf Mehdi, proving he hadn’t been paying one bit of attention to the press release up to that point. "While we understand the business need to periodically raise rates, we are providing a special offer for those consumers who are looking for a premium service at an attractive price."

Interestingly enough, the AOL and Microsoft are currently in talks about extending a pact that prominently features AOL’s software on Microsoft’s Windows OS.

The original five-year pact—which made Microsoft’s Internet Explorer the default browser on AOL, as opposed to the AOL-owned Netscape browser—officially expired on Jan. 1 of this year, although talks have been ongoing.

The discussions are being closely watched because some analysts believe how the deal shakes out could redefine the balance of power between what are essentially the Internet’s two dominant forces. AOL is currently the number one access provider and Microsoft’s Internet Explorer, with and 80% share of the market, is the number one browser.

"There are a bunch of things out there that make this much more complex," said a source familiar with the situation, quoted by Reuters, perhaps in reference to the story above. "Anything we're going to talk about has to be in the larger context of the relationship and working together."

That same source also said, "There is no deal. There's no 'close to a deal' or 'structure of an agreement' even suggested at this point."

Rivalry between the two companies has increased of late, with the two giants battling over instant messaging and now going toe-to-toe for subscribers.