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$199 Linux device in Prodigy deal

Ebiz Enterprises and its Linux Store unit is aiming a $199 Net device directly at ISPs, with a Prodigy deal leading the way.

Upstart operating system Linux got one step closer to mainstream use--and competing with Windows in the consumer marketplace--in a deal between a small computer maker and online service Prodigy.

Ebiz Enterprises and its Linux Store unit have released what they call the Pia, a $199 device that will be marketed through Internet service providers. Prodigy, one of the Internet's oldest service providers, has already signed up to promote the Pia, which stands for Personal Internet Appliance.

The online service sees Linux, a rebel open-source operating system, as a good way to power either cheap Internet appliances or servers at the center of high-speed home computer networks, Prodigy chief technology officer Bill Kirkner said today. "This provides a very effective, low-cost alternative," Kirkner said.

Under the deal, the Internet company and the computer maker will market each other's products and services, said Ebiz chief executive Jeff Rassas and a Prodigy spokesperson. The Pia has an AMD chip, 2.1GB hard drive, and 32MB of memory.

Ebiz is among the top 100 makers of generic PCs known as "white box" computers. The company is trying to associate itself with the Linux name in time for what the company perceives as the imminent boom of the use of Linux as a novice-friendly operating system to compete with Microsoft's ubiquitous Windows software.

Although Linux is not exactly a household name, it can offer significant cost savings to hardware makers. Windows 98 can cost small PC manufacturers close to $80 per machine, according to various sources, making it one of the more expensive elements of a computer. Linux, by contrast, can be had for free.

"It's an absolute shame that the most expensive component of the system is the operating system," Rassas said.

Prodigy is billing itself as being in the "forefront" of the move to support several kinds of hardware. "That's one of my core strategies," Kirkner said. "Overall we're trying to address the issue of ubiquity," where people connect to the Internet more and more with many more devices than just desktop computers.

Ebiz initially expects to lose money on the Pia, Rassas added, but believes the product will pay off in the long term from building up its brand recognition and from upgrades. "We wanted to hit the $199 price point, which is palatable to the average person," Rassas said.

In the longer term, Ebiz is planning to sell its Pia device bundled with Internet access for about $20 a month for two years, Rassas said. Prodigy wouldn't comment on whether it was pursuing such a deal with Ebiz, but a spokesman said the company is "working on expanding the relationship."

The deal gets Prodigy access to the Ebiz sales channel, which includes its own direct sales, Onsale, Yahoo, and the brick-and-mortar retail chain of Fred Meyer, which now has 3,400 stores, according to the Ebiz.

The Linux connection is only the latest development in the increasing ties between ISPs, computer makers, and computer retailers. Such deals are being driven by the increasing importance of Internet connections and by companies' desires to make their products stand out from competitors' offerings, analysts say.

Computer retailers, including CompUSA, Circuit City, and Best Buy, have begun offering discounts of around $350 to $400 on PCs for people who sign up with a specific Internet service provider. CompUSA and Circuit City have partnered with CompuServe; Best Buy is testing the waters in a deal with Prodigy.

PC makers including Gateway, Dell Computer, IBM, and Compaq Computer also are getting in on the ISP action, often offering Internet service as part of the computer purchase.

In addition, sources have reported that America Online is evaluating a cheap Linux computer.

About 50 small ISPs with 10,000 or fewer subscribers have signed on to the Ebiz plan of bundling the Pia with Internet access, said chief technology officer John Wise. The box also will be sold on its own for $199, not including a monitor.

Rassas said his company is in discussions with Mindspring to market the computers jointly. But challenges remain.

Mixing major Internet service providers with the upstart operating system is a tricky business because of the unfamiliarity of providing technical support for Linux customers. In addition, convincing ISPs that Linux machines are mature enough for widespread use is still an uphill battle, Rassas said.

"They're not real comfortable at this point in dealing with the potential customer service issues," Rassas said.

The deal with Ebiz is one step toward allaying those concerns, Kirkner said. Prodigy and the manufacturer can work more closely to identify and address trouble spots with a particular combination of hardware and software, he said.

Technical support is a key part of an ISP's business, so it's no wonder the companies pay close attention to it.

Ed Hansen of Mindspring said about 30 percent of its users call technical support in the first 90 days after signing up. New problems typically emerge with changes at Mindspring, with the user's computer, or with the phone company in between, he said.

"The assumption is that the Linux users are going to be pretty savvy with their computers, and they can fix their own problems," Hansen said. "That will change over time" as Linux becomes more widespread and more novices give it a whirl.

The move to Linux also is complicated by the fact that some Web sites, such as Yahoo, offer elaborate services that often work only on Windows machines.

BeOS too
Linux isn't the only alternative to Windows in the "free PC" movement.

Microworkz announced Friday that its iToaster, which uses a hybrid of BeOS and Linux for its operating system, will be sold for $19.99 a month for 24 months, including unlimited Internet access, said Microworkz chief executive Rick Latman.

Microworkz debuted its iToaster two weeks ago, part of a spate of Be-based boxes.