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Microworkz signs $300m ISP deal with AT&T

That's a heck of a lot of iToasters it needs to sell

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Cut-price PC vendor Microworkz has signed up AT&T as its new ISP following the company's fall-out with its original Internet access provider, EarthLink. From 15 August, anyone who buys a Microworkz iToaster Net access device will get free access to the Internet -- or at least for the first 150 hours they're online each month. Buy any other Microworkz PC and you'll get 150 hours of Net access for $11.95 per month, the company pledged. The company did not specify how much extra users would pay if they exceeded the 150 hours per month limit. Microworkz said the contract with AT&T will cost the company $300 million. The deal only lasts three years. Assuming an industry standard margin of 20 per cent -- and given the low cost ($199) of Microworkz' boxes, its margins are likely to be significantly lower than this -- the company will have to sell over 7.5 million iToaster during that three year period to pay AT&T, let alone actually make any money on the product. That's significantly more Internet devices than it managed to sell by bundling in Net connection through EarthLink. The ISP claims it gained only 1000 new customers through Microworkz -- and has yet to be paid by the PC vendor for providing them with Net access. That's why its suing Microworkz. The latter is countersuing, alleging its business was damaged by poor service on EarthLink's part. ®

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