Early reports of test versions of the software suggest the changes will mainly be cosmetic, including more high-speed Internet features and local content on the welcome screen. Other reported changes include faster loading of the software, minor tweaks to the AOL Instant Messenger's buddy list, and a media player that lets members play audio CDs and downloaded music files.
An AOL spokeswoman declined to comment in advance of the official release.
The release comes a day after Microsoft announced its own sweeping upgrades, dubbed MSN 7, set to take effect Oct. 25 in conjunction with the release of its new Windows XP operating system. The upgrades include an expanded DSL (digital subscriber line) service through MSN, a relaunch of the MSN.com home page that allows it to load faster, and additional features throughout its Web properties.
Tuesday's upgrade will be AOL's first since raising rates 9 percent in July; the company now charges $23.95 a month for its unlimited plan. Microsoft, meanwhile, has stuck with its $21.95 fee.
The software revisions come as AOL and Microsoft continue to slug it out over ownership of mainstream Internet users. Both companies have been moving toward controlling the process of online behavior such as using the Internet, conducting transactions, accessing account data, viewing news and information, and communicating with others.
The battle has crept into numerous areas but increasingly pit AOL and Microsoft against each other in software development, from Web browsers to media players and more recently e-wallet and universal sign-on services.
AOL has been working on technology that would allow it greater flexibility in offering support for Web browsers, code-named Komodo, but test versions of AOL 7.0 did not appear to include it. The Internet service currently offers Microsoft's Internet Explorer as its default browser.
AOL has also been developing a single sign-on service, code-named "Magic Carpet," that would ostensibly compete with Microsoft's ballyhooed Passport service. It was unclear late Monday whether AOL 7.0 would include anything new on this front.
Some observers have speculated that AOL may be cautious about adding features to AOL 7.0 that would force its members to upgrade to new hardware, a move that could strand a substantial number of subscribers in legacy versions of its service. Microsoft, on the other hand, has aimed explicitly at fueling sales of new PCs with Windows XP, which is not expected to run well on machines more than a year or two old.
Regardless, AOL remains leaps and bounds ahead of Microsoft in terms of the number of subscribers, with 31 million paid users vs. MSN's 7 million. But Microsoft said it believes MSN 7 is one step in the company's goal to integrate its Internet-based software with these consumer-oriented products.
"We're competing against AOL on multiple fronts, and certainly we're competing for the hearts and minds of consumers," said Yusuf Mehdi, vice president of MSN.
Mehdi said that roughly 40 percent of MSN's new subscribers over the past six months came from former AOL members.
Nevertheless, the momentum that AOL continues to garner, coupled by its media assets acquired through Time Warner continue to hook consumers into a variety of mediums, such as broadcast and cable TV, CD sales, movies, magazines, books and Internet services.
"One of things to remember is AOL grows an MSN a year," said Carl Howe, an analyst at market research company Forrester Research. "Yes, Microsoft has certainly targeted AOL with this latest round, but on other hand, I don't think they'll overtake them anytime soon."