The move, announced as Time Warner released its latest quarterly earnings, represents a bid by AOL to ramp up its fight for lucrative advertising revenues in the face of fierce competition from rivals Yahoo and Google, analysts said.

Both Yahoo and Google's competing e-mail services are free.

US customers have been deserting AOL's traditional dial-up Internet service in their droves, in favour of the much faster speeds offered by broadband.

Over three million users dropped the service in the quarter ended June 30, according to Time Warner's earnings report which also showed AOL's subscription revenues fell 11 percent or 188 million dollars in the three months.

The company said AOL would continue to offer its dial-up subscription service, "but will no longer aggressively market it".

Rivals Yahoo and Google have partly offered free content to entice new users to their portals in a bid to maximise their advertising revenues, triggered when users click on a web page ad.

Industry analysts said the move marked a "major transition" for AOL, which in the 1990s was the dominant Internet player but which has cut about 2,000 call-centre jobs as it tries to shore up its dwindling market share.

"Cost cuts and ad growth prospects are likely greater than the market is discounting," said Deutsche Bank analyst Doug Mitchelson.

However, the move is unlikely to have much impact on the company's earnings this year.

"As expected AOL announced it is making most of its features for free and this is not expected to have a material impact on full year 2006 guidance," analysts at Bear Stearns said in a note to investors.

Top executives said that Time Warner, which has been fending off pressure from billionaire corporate raider Carl Icahn to overhaul its entire business, was merely responding to customers.

"For the first time in AOL's history, we're offering many of AOL's most compelling products, such as its integrated software and e-mail as well as applications for safety and security including parental controls, to broadband users free of charge," Time Warner president Jeff Bewkes said in a statement.

"We've listened to our customers, and many of them want to keep using these AOL products when they migrate to broadband -- but not pay extra for them. So now we can tell them: 'You've Got Mail - for Free.'"

AOL had previously offered its e-mail services and software only to paying users. It has around 24 million global subscribers, but they are mainly in the United States, Britain, France and Germany.

Analysts said the move was not surprising because AOL has been vying to develop free-access programs, such as TV series, news and music, in a bid to compete with Yahoo and Google.

AOL, formerly known as America Online, is a shadow of its former incarnation. Just a few years ago, it was an Internet colossus and the driving force of the 2000-2001 mega-merger with Time Warner.

In the years since, however, it has weathered an accounting scandal and been relegated to one of the many divisions in Time Warner's sprawling media, film, publishing and entertainment empire.

Time Warner's stock closed up 42 cents, or 2.58 percent, at 16.67 dollars amid wider market gains.

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