Internet service provider PeoplePC admitted to using deceptive marketing practices and has agreed to refund customers who were billed excessive amounts in undisclosed charges, state attorney general Andrew Cuomo announced Monday.

"This settlement sends a message to companies large and small -- delivering a product is simply not enough," said Cuomo in a statement. "The promises must be delivered as well."

PeoplePC had prominently advertised its dial-up Internet service as unlimited and low-cost, offering dial-up Internet service at prices as low as "$5.47 for the first three months."

But Cuomo said several consumers incurred more than $500 in undisclosed long-distance charges while using the service.

Those charges apparently stemmed from PeoplePC's "Smart Dialer" service, which, the company said, automatically chooses the "fastest and most available phone numbers" within a local area.

Not so, according to the attorney general. The service would sometimes select non-local telephone numbers, subjecting dial-up customers to pricy, by-the-minute toll-access charges -- a practice the company failed to disclose.

As a result, some unsuspecting customers incurred long-distance phone charges far in excess of the advertised monthly cost of the local dial-up service.

In its settlement with the Attorney General's office, PeoplePC has agreed to clearly disclose hidden charges customers may incur; to provide refunds to customers who incurred unexpected long-distance charges; and to pay the state of New York $20,000 in penalties and costs.

New York customers who incurred charges by using telephone access numbers suggested by PeoplePC are encouraged to submit claims for refunds at www.oag.state.ny.us.

Owned by Earthlink, the company has around 1.6 million subscribers nationwide and 50,041 across new York state.