Gotcha! Free PCs Can Cost a Bundle

Though some vendors are exiting the bargain PC business and others have toned down their advertising claims, the supercheap computer craze shows no signs of abating. For example, at press time, a new entrant, PeoplePC, opened its doors with a no-money down, $25-a-month offer for a computer with three years of Internet access.

This past summer, James Drissel, a software programmer from Boerne, Texas, heard a radio ad offering a free refurbished PC just for signing a two- or three-year contract with FlashNet for Internet service. "It seemed like a good deal, so I jumped on it," he explains. But instead of a computer, all he got was a charge to his credit card. After waiting for more than a month and repeatedly calling the company to no avail, he gave up and canceled his order. "I'm really kind of leery of all the free PC offers," Drissel says now.

He's wise to be wary. Some of the companies making these aggressive offers may be too small or inexperienced to handle the demand for their products. In Drissel's case, FlashNet says the problem was simply that the company had an incorrect shipping address. "I'm not saying there weren't challenges with our free PC deal," says Jim Grandahl, vice president of marketing for the company. In fact, Grandahl says that FlashNet's customer service department was overwhelmed. But the company moved quickly to respond to the problem and expanded the call center and added more customer service reps to deal with the interest in the offer, says another spokesperson.

Microworkz customers understand Drissel's experience all too well. When the company launched the sub-$600 Webzster PC last year, the 30-person company was deluged with offers it couldn't fill. Moreover, it didn't issue refunds promptly. "We weren't ready to be that big," says company founder Rick Latman, who admits that the Webzster episode was a "fiasco." Customers who purchased the company's $200 IToaster this summer also endured problems getting their orders filled.

In the worst-case scenario, the vendor takes your money--and delivers nothing. National Research of Muskegon, Michigan, allegedly attempted to feed on the free PC frenzy by charging a nonrefundable $20 "enrollment fee." After investigating this Internet offer, the Better Business Bureau in Grand Rapids, Michigan, reported that National Research received orders for 12,000 free computers. The consumers sent in their enrollment fees but never received a computer, the BBB says. PC World tried unsuccessfully to contact National Research for this article.

Even after receiving their ultracheap PC, many customers are unhappy. Better Business Bureaus around the country have received complaints from people whose free PCs didn't work and who subsequently couldn't reach the vendors for support, says Sheila Adkins, public affairs manager for the Council of Better Business Bureaus in Arlington, Virginia. "[A number of consumers] are just getting the runaround," she says.

Louis Smith Jr., a high-tech professional from Staten Island, New York, bought an EMachines' PC for his parents, thinking it would be an easy, inexpensive way for them to get on the Internet. "I spent so many hours on the phone trying to get technical support and troubleshooting a modem problem with that machine...it wasn't worth the money," he says. In the end, EMachines resolved the problem by sending Smith a check for a new modem, according to CEO Stephen Dukker. Dukker characterizes his company now as being very focused on providing good support. EMachines outsources all its returns and technical support to a large third-party support company--the same outfit, Drukker says, that handles America Online, Compaq, and other big-name players. According to the Better Business Bureau in Orange County, California, where the PC seller is based, EMachines has resolved most of the complaints the bureau has received about it.

Another source of frustration for many consumers are the rebates that many dirt-cheap PC offers involve. At press time, the Council of Better Business Bureaus hadn't received any complaints from consumers who didn't get their free PC rebate in a reasonable amount of time (and PC World received only a few). But these offers are still relatively new. Rebates on other computer products--which are a common sales gimmick in the industry--generate frequent complaints to PC World.

For instance, Thomas W. Mackintosh of Bayonne, New Jersey, bought a Diamond Rio MP3 player in part because of a $50 rebate. He sent in the requisite paperwork, but his money never came. The company blames its fulfillment house for such rebate problems and says that it has since taken care of Mackintosh's and other customers' rebate woes.

Consumers aren't the only ones dissatisfied with free or nearly free PCs. FlashNet and Microworkz are leaving the hardware business altogether. Grandahl says FlashNet no longer offers free PCs. Latman says Microworkz is now a software and e-commerce company and hopes to settle with Washington's state attorney general before going to trial.

And at least two large companies are departing the ultracheap PC arena. This past summer, CyberMax offered a cheap PC bundled with Net service but withdrew the offer when the price of memory jumped and ate up profits. Micron PC launched a free PC offer on the Web but abandoned it in late August.

Still, giveaway PCs are hardly an endangered species. In fact, some low-cost PC vendors are thriving. EMachines sells its aggressively priced computers in retail outlets like Best Buy and Staples. AOL, CompuServe, and Prodigy offer a $400 rebate on EMachines units--as well as on other systems--when you sign up for their Internet services. EMachines' positioning seems to be working: Its share of the consumer PC market has shot up from nothing a year ago to 9.5 percent in the second quarter of 1999, making it the number three vendor in this growing category.

Some big-name vendors remain in the rebate game as well. Dell currently offers a rebate similar to the one the largest ISPs are dangling: $400 back on any Dimension or Inspiron system when you order it and sign up for Dell's Dellnet Internet service.

Other vendors have put together offers that address key consumer concerns. Since some people don't want to commit to three years of low-speed Internet service, CompuServe plans to allow customers who buy a PC with the ISP's rebate program to upgrade to DSL or cable access once the company offers those services, says CompuServe spokesperson Anne Bentley.

In the end, if you don't want to fork out a lot of money up front, a supercheap PC and ISP bundle may have lots of appeal. If so, you may want to act quickly, as rebate offers tend to be short lived. Just don't get so focused on price that you forget to shop around for the computer and Internet service you want. And remember to read the fine print--that's where a free PC can become too expensive.