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MSN casts net for AOL defectors

Microsoft's online service is on a mission to poach America Online's Internet customers just one week after AOL announced a subscription price increase.

Microsoft's MSN Networks is on a mission to poach America Online's Internet customers just one week after AOL announced a subscription price increase.
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 MSN: Ditch AOL, save $90
Bob Visse, group product mananger, MSN

MSN on Tuesday launched a $50 million nationwide advertising campaign designed to persuade customers to ditch their AOL Internet service and sign up for the Microsoft service. MSN is offering customers who switch to its service by June 30 three months of free Internet access as well as a $21.95 monthly rate guarantee until January 2003.

Last week, rival AOL said it is raising its monthly subscription rate by $1.95 to $23.90 beginning this summer. The 9 percent increase to AOL's monthly unlimited-use plan was widely anticipated by Wall Street as the company attempts to reach near-term financial goals. Microsoft at the time said that its MSN service, which has 5 million subscribers, or less than one-fifth as many as AOL, did not plan to follow the New York-based media giant's lead with a price increase of its own.

Microsoft also on Tuesday claimed that since AOL's recent subscription increase, MSN has received 50 percent more inquiries from potential customers who are looking for an alternative to AOL.

In morning notes, Merrill Lynch analyst Henry Blodget wrote that Microsoft's promotional response to AOL's price hike might inflict a "modest" drag on AOL's subscriber growth, especially given MSN's pickup in subscriber momentum in the last two quarters.

"In the past, investor concerns about Microsoft's impact on AOL has negatively impacted AOL's stock," Blodget wrote. "Therefore, although it will be several months before we know whether this current promotion is having a significant impact, we do believe Microsoft's announcement could have a negative psychological impact on AOL's stock."

In early trading Tuesday, AOL shares were down $1.30, or a little over 2 percent, to $52.23. Microsoft was down 20 cents to $70.71.

MSN Internet Access includes content and services from Microsoft's MSN portal site and from MSN Explorer, which combines the Redmond, Wash.-based company's various Internet products and services such as messaging and music software. The company said customers interested in its special offer can sign up on its Web site.