AOL, Microsoft Square Off

America Online and Microsoft are engaged in what could become a bitter tug-of-war over instant messaging as it fast becomes another cultural mainstay of Internet life.

The battle flared up last Thursday when Microsoft launched a service similar to AOL's Instant Messenger allowing users of its MSN network to send notes in real time to AOL subscribers. AOL, angered by what it considered trespassing in its private online community, retaliated by electronically blocking the rogue instant messages.

Since then, Microsoft has launched revised versions to get around the defenses constructed by AOL, which in turn put up new blocks.

Microsoft argues that instant messages, like e-mail, should flow freely between online services for all to use, and that AOL's attitude violates the spirit of the Internet. Microsoft is being backed on this issue by major allies like Yahoo! who want to make sure members of their online communities can "flash" a note to any of the 80 million users of AOL's instant messaging services.

"Imagine a world where we couldn't talk by telephone if we had different" phone companies, said Deanna Sanford, lead product manager for MSN marketing.

Sanford said her company will continue to post new versions of its software to elude AOL's defenses. A new version was posted early Monday.

AOL chief executive Steve Case downplayed the standoff later in the day as a "squabble" that could be resolved through talks, "not by Microsoft hacking into our network."

The jousting is as much about bragging rights as dollars, analysts said, because little revenue is generated directly from instant messaging.

Just as Microsoft wants to maintain dominance in the operating systems market, AOL wants to control the messaging market.

"This is essentially a political battle," said Simon Hayward, research director for Gartner Group in Stamford, Conn. "The issue is the way Microsoft went about doing this. AOL feels its turf has been stepped on."

Instant messaging initially caught on as a gossip tool at home and at the office, but has become a popular way to send comments more quickly and with even less formality than e-mail.

Still, because the notes have to be short, the business applications of instant messaging are limited.

Messaging services usually feature a "buddy list" that lets users know when friends or associates are logged onto the Internet. Messages appear in a box on a user's screen.

While AOL's instant messaging services, AIM and ICQ (short for "I seek you"), dominate the market, about 200,000 copies of Microsoft's messaging software were downloaded the first day it appeared on the company's Web site.

"There will be more rounds back and forth," said Mark Levitt, research director with International Data Corp. in Framingham, Mass.

Analysts also said the fight could have a positive result if t speeds the way toward an industry standard. They noted that e-mail in its early days also was restricted.

Yahoo!, Prodigy Communications and others are also urging AOL to open up its instant messaging network.

AOL has said it favors the development of industry standards, but plans to block competitors until they are. An AOL official said Monday a letter has been sent to Microsoft asking to discuss the issue.

AOL officials also say they're alarmed that MSN's Messenger Service asks AOL users to enter their user name and password before they can connect, raising privacy questions.

"We have it all over our screens: 'Never give out your password,'" spokeswoman Ann Brackbill said.