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EarthLink Giving Away Network Hubs

A new promotion by EarthLink, Inc. , giving away a $150 networking one-port gateway for free, is sure to bring in customers looking for a reason to sign up for broadband Internet access.

Officials announced Thursday they would hand out 2Wire's HomePortal 100 series to new digital subscriber line (DSL) customers through March 31. Or, if customers want a Wi-Fi hub, they can buy one for $150. A commercial-grade firewall is included in the 2Wire package.

There is a catch, however. Customers who buy into the networking promotion are signed up to the ISPs 12-month, $9.95 a month service. Users who cancel their service before the end of the 12-month contract are subject to a $99 fee (the cost of the equipment rebate).

According to Kurt Rahn, EarthLink spokesperson, new users can drop the monthly premium service after the 12-month contract has expired.

"The service is mainly for the inexperienced new users who might be a little nervous using the gateway right away," he said. "With the service, our users will get full support for anything they hook up to the gateway."

Regardless of the 12-month service package requirement, EarthLink's giveaway is sure to bring in new broadband customers who are sitting on the dial up fence and looking for an excuse to upgrade.

Currently, EarthLink has roughly more than 236,000 EarthLink DSL subscribers, which puts the ISP ahead of all DSL providers in the U.S., with the exception of the four incumbent phone companies and Covad Communications, a national data local exchange carrier (DLEC). In order to lure potential customers away from these popular DSL providers, EarthLink has to go to the extreme to get customers onto its high-speed service.

All told, the ISP is waiving more than $450 in costs to bring in new broadband customers: $200 for the DSL modem and self-install software, $99 activation fee and $150 HomePortal. That's a hefty price tag to bring in a customer for a $49.95 Internet service.

But EarthLink's willing to bet customers are going to stick with its service for the long haul. Studies show that consumer's are more inclined to stick with one broadband service after getting high-speed access.

Though the costs associated with reselling broadband through a regional Bell operating center (RBOC) or cable company, EarthLink stands to profit from their broadband customers after they have been signed onto the service more than a year or so.

Though initially available only for DSL, an EarthLink representative said a networking gateway for its cable users would soon be available, though he wasn't sure about their two-way satellite Internet customers.

According to research outfit the Yankee Group, 40 percent of homes in the U.S. have multiple PCs and 59 percent of those have a high level of interest in the connecting them through a home local area network (LAN).

EarthLink has been offering 2Wire HomePortals for about 10 months now for $150 and $300. Thursday's announcement signals a shift in its strategy to provide the gateway for free, though officials weren't available for comment on expectations for the giveaway.

Erika Jolly, vice president of value added services at EarthLink, said value-added services are part of their efforts to reach a bigger broadband audience.

"This year we're trying our best to deliver the promise of sharing a high-speed connection throughout the home to a much broader audience, and I can't think of a better way to kick off that effort than to offer the hardware for free," she said. "Home networking makes a high-speed Internet connection much more convenient and useful, and we want to make it as accessible for our customers as possible."

EarthLink joins a growing list of ISPs adding 2Wire gateways to entice new users. Last year, both Verizon Communications and SBC Communications signed deals with 2Wire to package the equipment for its broadband users.