It is hard to think of software maker Microsoft Corp as an underdog. But that is exactly the position it is assuming in taking on internet service provider (ISP) America Online.

With just 5 million worldwide users of its ISP, known as the Microsoft Network, or MSN, Microsoft is a distant second behind AOL, which has nearly 30 million subscribers, in the mature US market.

I think this is just another marketing gimmick

Jeffries & Co analyst Fred Moran

Microsoft is betting that AOL's recently announce price hikes will send some AOL members searching for lower monthly fees. And it hopes its "switcher campaign" will do the trick in luring more members its way.

You've got... higher fees

Last week, AOL said it was boosting its standard unlimited monthly access to rate to $23.90 a month. Microsoft is taking full advantage of AOL's proposed price hikes with a $50m ad campaign urging AOL members to switch while the switching is good.

Microsoft is appealing to value-conscious consumers by offering new customers one month free and guaranteeing the monthly $21.95 fee until January 2003.

While the rate is lower than AOL's new higher rate, it is still higher than number three Earthlink's $19.95 unlimited-access fee.

The software giant says that enquiries to its call centre have increased 50% from net surfers who are looking to switch from AOL.

Looking at each other's markets

But analysts do not view AOL's latest price hike as a potential Achilles heel for the internet portal.

"I think this is just another marketing gimmick in an industry sector with a ton of different marketing angles being pursued," says Jeffries & Company analyst Fred Moran. "Sure, there will be some people that will churn off AOL, but it will be of marginal consequence."

However, Microsoft's latest tack signals a shift away from finding new internet users to bring online to nabbing other customers.

"In the past, [companies] were focused on capturing growth by new users coming online," says Abi Gami, analyst at William Blair. "Now they are looking at each other's markets."