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Microsoft is prepping a new version of its MSN Messenger software that includes integrated Webcam and gaming features in an apparent bid to beat rival America Online to market. AOL has been reined in by regulators from offering some advanced instant messaging services.

The next version of MSN Messenger, due to be launched during either the second or third quarter, will include integrated voice and video features that allow users to communicate live, face-to-face over IM, the software maker said Monday.

Users are currently offered Webcam functionality over MSN Messenger, but as an add-on service provided by Microsoft partner Logitech.

Taking on AIM

Although AOL has also shown its intentions to offer Web functionality with its AOL Instant Messenger, it has been prevented from doing so thus far by regulatory stipulations made as a condition of AOL's 2001 marriage with Time Warner.

When the two media giants announced their intention to join, the U.S. Federal Communications Commission barred AOL from launching advanced IM services such as streaming video because it found that the merged media giant would "likely dominate" new, IM-based services, unless the company met certain interoperability requirements.

AOL Time Warner recently asked the FCC for relief from those requirements, however, arguing that fears that it would dominate the market have not come to pass. In fact, AOLTW said, it finds itself in a highly competitive IM market.

Microsoft's announcement that it is set to launch its own integrated streaming video service likely will serve to heighten the notion that AOL faces tough competition in the space. In fact, Microsoft said Monday that MSN Messenger now has 100 million active users a month.

IM: The Future

However, Ovum Principal Analyst John Delaney warned that by gaining market share and revving up its service, Microsoft could put itself in the position of garnering its own unwanted regulatory attention.

"They are undoubtedly drawing attention to themselves but it remains to be seen if this is a service that people really want," Delaney said.

Although MSN did not reveal how much integrated video and audio would cost, Delaney noted that they are expensive services to provide. That's why players such as Yahoo have not yet offered the services, Delaney noted.

In addition to Webcam functionality, MSN said Monday that the next version of Messenger will also feature more personalized services, a new user interface, and integrated gaming features that allow users to play live games such as double solitaire and checkers.

No one from AOL was immediately available to comment on the news.

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