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Summary:

Reliance Communications, an Indian wireless operator is now offering free netbooks in exchange for a two year contract for its wireless data service. Say hello to the new computing business model where laptops are sold just like cell phones.

The concept of offering free portable computers bundled with wireless Internet connections has been kicked around for a while, but not many have gone ahead and done it. Till now. Reliance Communications, a large telecom carrier in India, says that it will be giving away free netbooks for those who sign up for its two-year wireless Internet service. It has teamed up with Intel, Acer, Asus, HCL and Lenovo in order to make this happen.

Netbooks are highly portable versions of laptops that are typically powered by Intel’s Atom or Via Technologies’ chip. They are being viewed as the next big thing and are already logging robust sales. (I like to call them cloud computers.) Intel has placed a big bet on this technology trend. This is an announcement that brings the handset economics to the computer business — a major shift in how computers have been viewed — till today.

This application of the wireless industry business model (subscription) to the computing business means that we may finally see computer penetration go up in emerging economies. It is not easy for people to buy expensive computers in the emerging economies, but these smaller netbooks that can be attached to a keyboard, mouse and a monitor can help overcome those barriers.

The new offer holds hope for Intel specifically. It can help the chip giant find success for its Atom-platform and turn it into a new engine of growth. ABI Research projects that there will be 200 million mobile Internet devices sold in 2013 and half of them will be powered by Atom. For Intel, which has been struggling to get a toehold into the wireless industry, this might be the best way.

In order to get a free netbook, consumers will need to sign a two-year deal for Reliance NetConnect that will cost about 1,500 rupees or $30 a month and currently runs on the older 1xRTT technologies.

The $30-a-month offer is still too expensive, and Reliance might need to lower prices on Internet access. Of course, given the competitive nature of the Indian mobile market, don’t be surprised to see similar announcements from other major mobile carriers such as Bharti Airtel, Vodafone and Tata.

That would ensure mobile data prices decline rapidly. But till then Reliance can sign up customers quickly and lock them into two-year contracts, giving the company a platform on which to sell its 3G services to its customers. Reliance will transition to 3G technologies soon. The Indian telecom regulator recently cleared the way for 3G networks to be set up in India. Reliance is also in the process of moving away from CDMA to GSM-based networks.

Update: As outlined in our comments, Reliance joins Orange Slovekia and Carphone Warehouse in UK in offering Broadband-subsidized laptops and netbooks.

  1. i think that an even more interesting model would be for the network operator to get a fixed cut out of the retail sale of netbooks/laptops and provide lifetime free internet. with the cash flow going business to business they should be able to offer much cheaper prices since they would not have to huge consumer marketing expense.

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  2. @spg, that kind of model would work when the money is cheap. not right now — there isn’t much room for carriers to do that kind of dance. :-)

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  3. Free laptops with home Internet connections have been around for a while in the UK and recently this has changed to mobile internet connections and netbooks.
    The problem with providing the internet connection with a laptop is there is rarely any profit on computers, at least not on the low end machines, where as a £20/$40 a month contract ensures a constant revenue stream.

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  4. The carphonewarehouse in the UK has been offering free laptops when you purchase wireless broadband for quite a while.

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  5. @Arthur Guy

    I agree with you totally. but in rest of the world this is an approach that makes sense and while i think the $30 a month is too much I believe that the free market is going to take care of that. On the netbooks, the profit margins are so low that everyone is looking for volumes – hardware makers to Intel to seller. This can be lucrative for INtel for sure in my opinion.

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  6. @Joe_90… I thought that offer was for broadband connections not wireless. Can you clarify and point me to the details of that wireless deal so I can update my post. Thanks

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  7. Offers subsidising laptops (to free) have been around of a while in the UK with both fixed and wireless broadband services. Carphone warehouse even offers “free” PS3 or Wii with longer fixed broadband contracts

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  8. With a list price in the states of around $300-350 for the Linux-y flavors of Netbooks, and $350-450 for XP versions, you’re basically at the point of the cost of a cell phone (which should kinda beg the question on the BoM for a phone vs a NetBook, but that’s another day’s journey…)

    But make no mistake, computers into developing markets is a long march, not a sprint….

    Going into emerging markets gets you into long-tail/long-headache issues for penetration, specifically power and education. You don’t have to have a high level of literacy to use a cell phone. Power is a more interesting issue that I suspect is going to be overrun by the GreenTech types with a combination of cheap(er) solar and locally generated power (wind, bio, maybe hydro).

    As for Netbooks = cloud computers, I think you’re a little foggy. :) Having sufficient resources to do work when the network is down/unavailable (and it will be down) is the real key to utility, otherwise the X-terminal/Citrix/Failed Larry Ellison company models would have already taken over the earth.

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  9. Operators in Eastern Europe have been using the subsidized model for a while now. In fact, Orange Slovakia is apparently the second largest retailer of laptops there! Michael Dell is betting his netbooks will take off based on this model. The surprising element here is that Reliance is not offering WIMAX with this offer, given that they are deploying fixed WIMAX all over India.

    http://mobilebroadbandblog.wordpress.com/2008/09/26/3g-embedded-netbooks-killer-product/

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