As AOL and Microsoft square off in their fight for Net dominance, the battle lines are drawn:
When AOL (AOL) cut a deal with Compaq (CPQ) to appear as the preferred Internet service provider on its machines, Microsoft (MSFT) countered that PC makers must also carry the MSN icon if they offer a competing Net service.
AOL is exploring an acquisition of AT&T Broadband's cable systems. Microsoft, which has already invested $5 billion in AT&T Broadband and $1 billion in Comcast (CMCSA), could block any AOL deal.
AOL holds the lead in the instant-chat business. Microsoft is pushing AOL to let rival services link up with its users. Now, it's bundling messaging software into the newest version of Windows.
When AOL raised rates to $23.90 in July, MSN held prices steady at $21.95 and launched a marketing blitz to win over AOL subscribers. Still, MSN has only 6.5 million subscribers, vs. AOL's 30 million.
AOL and Microsoft will soon compete for online music-subscription services. AOL Time Warner has teamed up with Bertelsmann and EMI to offer MusicNet, and Microsoft is allying with Vivendi Universal and Sony to push PressPlay.
Microsoft tried unsuccessfully to elbow aside Real Networks, the company that provides AOL with audio and video software. It wanted AOL to use Windows Media Player instead, but AOL refused.