Gateway signs up for MSN service

The arrangement means that Gateway is offering Microsoft's Internet access service and navigation software alongside similar software from MSN rival America Online.

But Gateway is still giving AOL top billing. The first time a new PC boots up, customers will see a prompt for the AOL service. To choose MSN 8, a customer will have to select it from inside the Windows "Start" menu.

The deal comes as something of a surprise. The PC maker has had a long relationship with AOL, which invested $800 million in Gateway in 1999 as part of a joint product and services marketing agreement and since then has been the company's de facto Internet service provider. Gateway even moved many of its Gateway.net ISP customers to AOL after it shut down that service.

A Gateway representative said the Poway, Calif., company chose to add MSN 8 because it wanted to offer its customers, particularly those with high-speed Internet access, more choices on how to connect to and navigate the Internet.

"Basically, Microsoft gave us an attractive offer for our customers--especially with the ability to use the MSN 8 functionality with a broadband subscription," Gateway spokeswoman Lisa Emard said.

The company started selling broadband subscriptions in January 2001 and has since formed a number of partnerships with companies that offer such services, Emard said.

Gateway's relationship with AOL hasn't been entirely smooth, and the two have been disputing fees that the online giant pays the PC maker for recruiting subscribers. Changes in payments made by AOL hurt Gateway's fourth-quarter 2002 earnings. Gateway said at the time that AOL recomputed payments made during 2001 and the first half of 2002 and withheld some claimed overpayments.

That dispute did not affect the decision, Emard said.

For Gateway customers who choose to sign up for MSN 8 dial-up Internet access, MSN will charge $21.95 per month, after granting three months of free service. For customers who already have an Internet connection, but want to use MSN 8 services, Gateway will offer a $9.95-per-month contract that includes the first two months at no charge, the company said.

Gateway's current AOL offer includes six months of free service for customers who buy new PCs. After that period, AOL service costs $23.90, Emard said.

Representatives at AOL did not immediately return calls for comment.