Microsoft will charge its Microsoft Network (MSN) customers a flat fee for unlimited Internet access in an attempt to remain competitive in the highly price-sensitive online services market, a spokeswoman has confirmed.
Meanwhile, a spokeswoman for America Online is refusing to confirm a report that AOL would be doing the same, saying the firm doesn't comment on rumours. However, spokeswoman Pam McGraw says the company is testing different pricing structures, although she won't discuss any details. "There's always a variety of pricing options to test with consumers to determine what the sweet spot is," she says.
One analyst says moving to a flat-rate fee is a "capitulation to the realities of the industry". "Users don't like per-hour charges, especially when the competition is plentiful at the fixed rate," says Ira Machefsky, an analyst at Giga Information Group in Santa Clara, California. "Is that something they can survive on? Wow! I don't know. The amount of proprietary information compared to what's out there is less and less. There's basically no reason for anyone to put their stuff up on AOL anymore."
Currently, MSN charges either US$4.95 a month for three hours and US$2.50 per additional hour, or US$19.95 a month for 20 hours and US$2 per additional hour for the frequent-user plan. AOL charges US$9.95 a month for five hours or US$19.95 a month for 20 hours and US$2.50 per additional hour. Other access providers offer packages that include unlimited usage for flat rates, such as AT&T and Sprint.
A Microsoft spokeswoman is declining to confirm a Wall Street Journal report that says the company plans to charge US$19.95 a month for unlimited Internet access and US$6.95 a month for unlimited access to MSN's proprietary content. Microsoft has scheduled a news briefing for today at its headquarters in Redmond, Washington, at which details will be announced, she says. The company launched MSN in August 1995 and in December 1995 followed other service providers in moving from an online service business model to a Web-based service model.
Meanwhile, AOL has been losing subscribers and acknowledged so in a filing last week with the Securities and Exchange Commission that led to a 10% drop in stock price, the Journal reported.