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AOL unveils 7.0 as competition mounts

The Internet giant announces the availability of the new version, an upgrade that comes as competitive pressure from Microsoft heats up.

Internet giant America Online announced the availability of its AOL 7.0 software Tuesday, an upgrade that comes as competitive pressure from Microsoft heats up.

As previously reported by CNET News.com, the changes in the software are mainly cosmetic, including more high-speed Internet features and local content on the welcome screen. Other changes include faster loading of the software, minor tweaks to AOL Instant Messenger's buddy list and a media player that lets members play audio CDs and downloaded music files.

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 is 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 two companies have also stepped into the realm of selling high-speed Internet access. Microsoft will offer MSN through DSL( digital subscriber lines) for $49.95 a month with 10 hours of dial-up access. AOL has been introducing its High Speed AOL one market at a time throughout Time Warner Cable's systems. High Speed AOL will cost $54.95 a month with unlimited dial-up.

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 AOL 7.0 does not include it. The Internet service offers Microsoft's Internet Explorer as its default browser.

The company has also been developing an authentication service, code-named "Magic Carpet," that would ostensibly compete with Microsoft's ballyhooed Passport service. AOL 7.0 does not 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."