Selling Netbooks With Phone-Style Plans

I've always liked my laptops small and light, so I didn't take long to jump on the netbook bandwagon: I bought an HP Mini 1000 shortly after it appeared late last year. But a recent ad campaign on PCWorld.com made me wonder if I hadn't jumped too soon.

Radio Shack ads touted an Acer Aspire One netbook with built-in mobile broadband for a mere $100--provided that you committed to a two-year, $60-per-month data plan with the provider of said mobile broadband, AT&T. (Dell had a similar offer for its Inspiron Mini 9 netbook back in January; that one has expired, but the company still gives smaller rebates on the purchase of a Mini with an AT&T data plan.)

The Aspire One had been selling for $350, so the Radio Shack price just for the netbook itself represented a significant discount. And since presumably anyone who buys a netbook with a built-in mobile broadband adapter intends to get mobile broadband service too, the deal doesn't sound half bad.

It also sounds pretty familiar. This is basically the same way major cell phone carriers have been selling handsets in the United States for the last two decades: They subsidize the cost of the handset in order to acquire the greater revenue you'll generate as a customer over time.

In this case, two years at $60 per month (for up to 5GB of data) comes to $1440--a healthy chunk of change for AT&T, even assuming that it picks up the entire $250 difference between the previous price of the Acer and the Radio Shack offer (which it probably isn't). AT&T is happy with the response to the offer, says Glenn Lurie, AT&T president of emerging devices and resale.

But for customers, the offer has the same downside as a subsidized cell-phone purchase: It ties you to a network and a portable that you may not be happy with over time. If, after a year, you want to sell your netbook and drop your service, you'll be stuck with an early-termination fee. Admittedly, such charges are no longer as draconian as they used to be--the fee starts at $175 but drops $5 for each month you stick around, so after a year you'd have to pony up $115.

That's still less than the discount on the original netbook purchase, but it is off-putting. And if your netbook dies on you, or you lose it, you're on your own for replacing it--at full cost.

Of course, such drawbacks don't stop most cell phone buyers from taking the subsidy for a new handset and signing on for two-year commitments (although some of my colleagues do prefer spending more on unlocked phones to keep their upgrade options open). Will you be more likely to find your netbook looking long in the tooth after a year than you are to find a cell phone unbearably dated? AT&T's Lurie says no, pointing out that most people are keeping PCs and laptops longer than they used to. On the other hand, you can just as easily argue that netbooks are a brand-new category, and therefore likely to evolve more rapidly than phones.

I'm undecided on the obsolescence issue. My main beef with the cell-phone subsidy model for netbooks is that I'm not in the market for a $60-a-month data plan. I'm an infrequent traveler, and I use my netbook mostly for taking notes at meetings. What I would like to see, however, is a pay-as-you-go alternative for mobile broadband service--something along the lines of Wi-Fi hotspot services at airports and hotels--so that on the occasions I do travel, I could benefit from a built-in mobile broadband card.

AT&T's Lurie says I may get my wish in the not-too-distant future: As netbooks become more mainstream, carriers will probably develop new types of data plans. "We're going to have to make sure we give customers a lot of choices," Lurie says.

That's encouraging news. If pay-as-you-go mobile broadband does materialize as a netbook option, I'll have to seriously consider selling my Mini 1000 on eBay in order to jump on the new bandwagon. Even if I don't get a big subsidy, the convenience of affordable and ubiquitous connectivity would be worth it.

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