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MSN faces billing problem

Microsoft Network is trying to clear up a massive billing problem that dates back to June but it will take a month or two until the situation is completely resolved.

Microsoft Network (MSFT) says it is clearing up a massive billing problem that dates back to June but it will take a month or two until the situation is completely resolved.

Many of MSN's 1.5 million subscribers face credit card charges for their usage in June, July, and August, but the company said most customers will pay less than $50 for those three months. However, some heavy users may find "several hundred dollars" of charges on their credit card statements, the company said.

The problem is the second high-profile case which features the difficulties of billing for online services. Today in San Francisco, a judge will decide whether to permit a settlement between number-one online service America Online and subscribers who allege that they were not notified of AOL's billing procedures.

Microsoft declined to say how much revenue was caught in the MSN backlog, but conservative estimates put it at more than $22 million. The basic subscription for MSN, which now claims to be the third-largest online service, is $4.95 a month for three hours of use, then $2.50 an hour or $19.95 for 20 hours a month, then $2 an hour.

"During the next four to eight weeks, your credit card billing statements will begin to show those charges and account credits," Laura Jennings, MSN vice president, wrote in a letter emailed to subscribers yesterday. "We realize it is not very pleasant to be faced with charges incurred some months ago, and we apologize for any inconvenience these delays may have caused."

The letter will be sent by regular mail to MSN subscribers within the next week; international subscribers will also be notified within that time.

MSN marketing manager Michele Bourdon blamed the billing backlog on the service's rapid growth. MSN built its own billing system based on its Windows NT operating system and SQL Server. The system was designed to bill 1 million subscribers after 12 months from the launch, but MSN hit that figure in seven months.

Likewise, Microsoft's credit card processor Nabanco and the credit card companies couldn't scale as quickly as MSN grew.

"The entire infrastructure wasn't set up to handle as many bills as we tried to push through the pipeline," Bourdon said. The problems with MSN's billing system, however, did help improve both Windows NT and SQL server, she added.