The new service, called "Microsoft MSN Internet Access Presented by Costco Online," is being sold as a CD-ROM at Costco for $35.97 and includes three months of Internet access--which breaks down to about $11.99 per month. The CD-ROM, which has been on the shelf at Costco since last week, is only available to Costco's 13.1 million members.
The initiative comes at the same time Microsoft said it was considering a low-cost access service to compete with America Online. Increasingly, the two giants appear to be on a collision course for domination among consumers online.
AOL has distanced itself significantly from its ISP competitors. It has nearly 18 million subscribers that pay $21.95 per month. In addition, about 2 million users subscribe to AOL-owned CompuServe. By comparison, MSN Internet Access has 1.8 million subscribers, according to research firm Jupiter Communications.
The companies have been engaged in a heated battle of late over instant messaging. Microsoft's recent release of its MSN Messenger service included a feature that can communicate with AOL Instant Messenger (AIM) users. AOL has blocked MSN Messenger users from accessing its user list, and last week it began logging off MSN Messenger users who were accessing its system.
AOL has alleged Microsoft is hacking into its servers and violating privacy codes by asking users for their AIM passwords. In return, Microsoft has called on AOL to join efforts by the Internet Engineering Task Force (IETF) standards body to develop a common platform for instant messaging clients to communicate with one another.
AOL countered Microsoft by asking it to join its own instant messaging advisory board.
Under the Costco plan, MSN subscribers can preserve their existing MSN email address and change pricing plans in October when the service is available for "automatic conversion," according to a page on the site. The billing change will occur after an MSN Internet Access member's contract expires, a page about MSN conversion said.
Once the three-month deal expires, users can sign up for another three-month period for the same price.
"The deal is just one of many innovative ways the group is promoting Internet access," said a Microsoft spokeswoman.
In related news, Los Angeles-based computer maker Lan Plus today said it will offer free membership to MSN Internet Access for users who sign up for its "MyShoppingClub.com" program. Membership for the shopping service is $59 for one year or $99 for two years.
Lan Plus also recently said it would offer free computers to customers who pay for three years' worth of MSN Internet Access in advance.
Reuters contributed to this report.