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Charter, Microsoft Ink Broadband MSN 8 Deal

Paul Allen's Charter Communications has struck a deal with Microsoft to offer Charter's broadband customers access to Microsoft's MSN 8 content.

Charter broadband subscribers will have the option to sign up to MSN 8 and its Web-browsing tools and proprietary entertainment, financial and news content for $9.95 per month. The partners will split revenues for those subscribers that decide to sign up to MSN 8, the precise financial sharing agreement was not disclosed.

In an effort to entice customers to the MSN 8, Microsoft and Charter will offer the service for the first two months beginning in the second quarter of this year.

The Charter deal is part of Microsoft's bid to carve into America Online's massive lead over it in the dial-up and broadband online access market. Microsoft's MSN now has close to 9 million subscribers, while AOL boasts a customer base of 35 million. Microsoft recently signed deals with Verizon Communications and Qwest Communications to offer MSN services as part of the telecom carriers DSL broadband offerings.

St. Louis-based Charter Communications, the nation's third largest cable operator with 6.7 million subscribers, of which close to one million are broadband customers. Charter has been beset by a variety of problems, including a recent upper management shake-up, a lowering of its debt rating by Standard & Poor's, and an ongoing federal criminal investigation of Charter's subscriber accounting practices. Charter's stock price has fallen more than 90 percent over the last year and is trading just over one dollar.

Microsoft is pursuing other deals with leading cable and telecom carriers to get its MSN service piggybacked on broadband subscriptions nationwide. Microsoft may have a better chance of signing a similar deal with Comcast, which recently took over AT&T's broadband customers, but is not likely to cinch a partnership with Time Warner Cable, a division of AOL Time Warner, America Online's parent company.

Late last year, Leichtman Research Group said that at the end of the third quarter of 2002, cable and DSL providers in the U.S. had signed up 15.6 million broadband subscribers. The study found that in the third quarter of 2003, cable companies garnered 1.1 million new subscribers, while telephone companies increased their subscriber base by 539,000.