Are ISP Subsidies Coming Back?
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News Analysis. For U.S. computer buyers, RadioShack may answer that question next week. |
Engadget posted a portion of what presumably is next week's RadioShack circular. The ad offers the Acer Aspire One netbook for $99, with a two-year AT&T data agreement. If the ad is legit, it's foreshadowing. The future of low-cost computers may be the past.
During the recession eight years ago, major retailers offered PCs anywhere from free to a few hundred dollars with typically three-year ISP commitments. Major ISPs like AOL, Prodigy and MSN subsidized the discounts, which helped keep PCs selling at least during the recession's early days.
Another recession is upon us, with a new category of low-cost PC and another kind of ISP. Netbooks are cheap, light, tiny and increasingly popular. Some newer models are wired up for wireless broadband via 3G services from carriers like AT&T. Netbooks are computers crying out to be wired—ah, unwired—by 3G. Typical screen size ranges from 8.9 to 10.3 inches for a PC typically weighing 2 to 3 pounds. They're truly ultraportable. Newer models feature a 1.6GHz Intel Atom processor and larger hard drives, typically 120GB or more.
Netbook carrier subsidies already are fairly common outside the United States, according to IDC (in early December) and DisplaySearch (yesterday). According to IDC, 60 percent of netbooks were sold into the European market during the first three quarters, with telco deals generating half of the volume.
"In certain geographies ... a number of mini-note PC brands are partnering with telecom providers to subsidize mini-note PCs, much like they do mobile phones," John Jacobs, director of Notebook Market Research, said in a statement accompanying the DisplaySearch findings. The analyst firm refers to netbooks as min-notes, while Gartner and IDC use mini-notebooks.
Cost of the data commitment is significant. For example, AT&T charges $60 a month for 5GB and $0.00048/KB for additional data. The base price works out to $1,440 for the life of the AT&T contract. So that $99 price isn't so cheap in that context. I'm assuming that AT&T isn't discounting its normal data rates.
But what if you need that always-on connection and are in the market for a netbook? RadioShack has a helluva deal. Last time I checked, AT&T charges $175 to break a contract, which with the $99 would still be cheaper than buying an unsubsidized Aspire One (BestBuy lists the netbook for about $350).
Whether viewed from portability or luring budget buyers, netbooks are ripe for U.S. carrier subsidies. But I expect more interest among small businesses than consumers.
Quarter-to-Quarter Netbook Sales Up 160 Percent
The netbook category is hot and getting more so. According to IDC, manufacturers shipped 6.5 million mini-notebooks during the first three quarters. The analyst firm predicts full-year shipments of 10.88 million, up from 181,000 last year. DisplaySearch, which released its findings a month later than IDC, is more bullish on 2008 sales: 14 million units. Between the second and third quarter, netbook sales grew 160 percent, according to DisplaySearch.
This is Microsoft Watch, so what does this all mean to Microsoft? Netbooks are OK but not great computers for the company. Most netbooks ship with Windows XP and many with the Home Edition at that. Microsoft sells a Windows license, but a cheaper one and for an older OS version. Only about 1 percent of netbooks ship with Windows Vista, according to IDC.
Microsoft claims that Windows 7 will run on netbooks, but I'll have to see it to believe it, since Seven is built on Vista. That said, netbooks are living an accelerated Moore's Law existence. Features improve month by month. Hey, in the animal world little critters have fast metabolism and short lives.
The earliest netbooks came with Linux, 512MB of memory and 4GB solid-state drives. Newer models rival low-cost notebooks for most features other than graphics. What happens when—and I don't believe it's if—NVIDIA's GeForce 9400-series mobile graphics chips come to netbooks. What's good enough for Apple's MacBook or MacBook Pro is even better for netbooks running Windows Vista or 7.
Microsoft already has announced networking changes in Seven that should greatly improve traversing different networks—built-in 3G, Wi-Fi hot spots, corporate networks, and home wired or wired networks. From a networking perspective, Seven will be ready for netbooks.
That said, Microsoft miscalculated by assuming that the market standard of art would be more powerful systems, when instead the emphasis is portability—where Vista can demand more than portables have to give.
[Please send your tips or rumors to watchtips at live.com].
Related Posts:
- Does Windows Have a Future on Netbooks? Microsoft Watch, Nov. 3, 2008
- Origami: Flattened by Netbooks? Microsoft Watch, Sept. 29, 2008
- XP Pro Execution Set, Home Gets Reprieve, Microsoft Watch, April 3, 2008
- Microsoft's Big Problem in a Small Box, Microsoft Watch, Dec. 7, 2008
Comments (3)
You miss the big part of this Netbook picture though Joe. The category is still in its infancy. When Windows 7 is released or little after that, it will start to gain more wide acceptance where the majority of consumers will contemplate buying or having one. Windows 7 does run on Netbooks, Steve Sinofsky showed it at PDC 2008 various various bloggers have verified it.
Performance was never an issue with Netbooks and Vista, it was the disk foot print. As you noted, when Netbooks first came out they had bare specs, Vista requires at least 11 GBs of space. But, look at the form factor these days, larger hard disk, more powerful CPU's, discrete graphics, memory, they are more than ready for Windows 7. And so what if they are running Windows XP, Microsoft committed to supporting the OS anyway until 2010.
Posted by Andre Da Costa | December 9, 2008 4:34 PM
Wireless data plans suck regardless if you are for Windows or Linux. 5 GB a month limit is way too low for the $60 a month.
If the limit was 20 or 30 GB a month for $30, you would see a lot more people going for it and maybe even dumping their DSL like people dumped their land line phones.
I remember the old AOL dial up plans where you would get a computer for $99 and be stuck with a three year commitment. This was around the time where broadband just started to take off.
Seemed like a good idea at the time until you realize that by the second year, one realized that dial up didn't cut it anymore.
As far as these deals go where you can get a netbook for $99 with a wireless contract. Don't go for it (regardless of if you are pro Linux or pro Windows).
You can buy full fledged laptops often for $499 or less (some even $399 at Micro Center) with Windows, you can add Linux as a dual boot and get a great deal.
You can buy netbooks now from $279 to $349 with no commitments, no headaches. With the economy the way it is, a two or three commitment isn't the best way to go.
Supposedly AT&T has a "pay as you go" plan for wireless internet, you buy the wireless USB dongle and just pay from month to month with no commitments.
I think even upstart "Cricket" offers some deals on wireless internet.
Bottom line look around, don't get into long term commitments with wireless internet.
Posted by Ralph | December 9, 2008 5:25 PM
"And so what if they are running Windows XP"
Windows XP sells for a lot less than Vista (and 7 I assume). Also it is a much bigger portion of the sale price in these small machines, so a Vista machine will be more expensive than an XP or Linux machine.
Windows XP costs you 1" in screen size, an 80Gb HDD instead of a 40Gb SSD. This is based on the Eee PC 1000 with Linux vs the Eee PC 904HD with XP.
Posted by billybob | December 10, 2008 12:32 PM