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Summary:

If you thought a $99 netbook might spur demand, what do you think a 99-cent netbook will do? We’ll soon find out, because Sprint is subsidizing Compaq’s 1040DX netbook. Customers can get the offer in a local Best Buy and have to activate the embedded EVDO […]

If you thought a $99 netbook might spur demand, what do you think a 99-cent netbook will do? We’ll soon find out, because Sprint is subsidizing Compaq’s 1040DX netbook. Customers can get the offer in a local Best Buy and have to activate the embedded EVDO module with Sprint for the one-dollar device. The same netbook with service through Verizon Wireless or AT&T is $199.99, while a non-contract price is $389.99, as shown on the ad page:

99-cent-netbook

The Compaq 1040DX is basically a rebadge of HP’s Mini and offers the same specs: 10.1″ display with 1024 x 576 resolution, 1.6GHz Intel Atom N270 CPU, three-cell battery, 1GB of RAM and a 160GB hard drive. Although I use too many devices to be locked into an embedded 3G solution, the deal might appeal to some.

From a business perspective, Sprint is fully subsidizing the hardware price in order to gain a two-year service agreement. At $60 a month, the 3G service costs the consumer $1,440, for a rough net gain to Sprint of around $1,050 over two years for a single customer. Voice revenues are taking a back seat to the more lucrative data services, so I think this is a smart play for Sprint. All three carriers have invested billions of dollars in their networks, but you can’t recoup your costs and turn a profit if you can’t get customers on the network. In a recent, detailed 3G test, Sprint won out as the “most reliable” network, but you don’t earn money by winning titles. You have to get paying customers, and at 99 cents for a netbook, Sprint might do just that.

I’m wondering why the other two major carriers are still flirting with a $200 subsidy instead of the full monty. At $60 a month for service, the payback is over after the third month of a two-year contract. Why not just bite the bullet and match Sprint’s deal to gain more network subscribers? Again, I’m not the target customer for any of these deals, but I’d like to see all of the carriers widen the breadth of netbook options as well. There are plenty of excellent netbooks that offer more under the hood. How about some deals with ASUS or Samsung?

  1. It might make sense but if you price at $1 people will ask what’s the catch and then will notice the subscription price. Less obvious if you are charging $199. And the additional people you catch at $1 are more likely to be people you will have problems with. These are possible cons in addition to the pros.

    That said, all this subsidizing should really be illegal; why does the FTC allow this?

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    1. if they offered this with their usb aircards i would get it, internal broadband receivers have their downfalls you have to use the netbook to use the connection and the only way you could share the connection is through lan or ad-hoc

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  2. Ken Jackson Monday, July 6, 2009

    Why would subsidizing be illegal?

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  3. I agree. What is wrong with subsidizing? As long as the providers are upfront and clear about what the consumer is getting.

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  4. i am really concerned that if subsidizing become popular it will significantly inflate the cost of netbooks. it will end up being totally obsurd if a full blown laptop becomes cheaper then a straight up purchase of a netbook without contract. but that is likely to happen.

    look at the absolute craziness of the price differential between an ipod touch and an unsibsidized purchase of an iphone to see what i am talking about.

    i think it would be well for the FTC ban subsidizes; instead the carriers could have much lower monthly fees and offer to ‘finance’ phone and netbooks over the term of the contract. at the end of the two years your monthly fee would drop by the finance amount or you could just pay up front for the phone or computer and have a lower monthly bill.

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  5. There is still something I don’t understand about the argument against carrier subsidized netbooks. I have an AT&T wireless broadband account that costs me 60 dollars a month. I use an AT&T Sierra wireless modem that cost me around $80 dollars. Sprint is offering to charge me the same monthly fee and give me an entire computer for a dollar. I’m going to pay the $1440 over 2 years no matter what, because I want 3g wireless internet access. Why not get a free computer out of the deal? (Charging me a dollar for a computer is close enough to free for me.)

    In my mind, I don’t see the sprint deal as a $1440.00 netbook. I see it as $1440.00 of 3g access that comes with a netbook. The only downside for me is the inability to use the 3g access with multiple computers.

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  6. The subsidizing is a good thing for people who don’t mind the commitment. The only beef I have is with the exclusivity agreements these carriers get. Phones are phones, and you should have a good enough service where you don’t need to hijack a good phone on the market just to get subscriptions i.e. AT&T and VW. Sprint’s Plam Pre is similar, but the difference is their whole plan is cheaper and better anyway.
    The end of the day, give good prices and customer service you will keep your customers and get more.

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  7. This is an AWESOME deal!

    TateJ has it absolutely correct. You’re paying for $1440 worth of awesome 3G data service and getting a FREE netbook. As opposed to paying for $1440 worth of 3G data and having to pay $200-$400 for your own netbook (and deal with some breakable dongle hanging off the side).

    Given the netbook is Windows equipped just turn on Internet sharing and hook to a home router.

    This isn’t ideal for everyone. But it makes sense for so many; people looking for quick, light access to their “world” away from home broadband. With smartphones and netbooks on the rise the industry is reacting to what the consumers are demanding.

    Tom: If there were no subsidizing I’d bet my next paycheck that you’d either NOT have a cellphone today or you’d have a crappy, cheap, featureless cellphone that just makes calls…and flips shut. That device would have cost you $400 out of pocket instead of being free. And guess what? You’d STILL be paying $60-$100/mo for your service ANYWAY.

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  8. I think it’s a very savvy business move for Sprint. It will lead the industry and I see that as a good thing. Next stop: a heavily-subsidized netbook with prepaid service. Oh yes. This is where the action will really be, eventually.

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  9. I don’t have a problem with the subsidies themselves, but what I wish is that those of us who didn’t take a sub got a discount on our monthly fees equal to the savings a subsidized user would see on the initial purchase price.

    I’m on AT&T and have never had a subsidized phone (unlocked my T-Mo branded Sony T610 when I ported in, bought a J220a when I washed the T610, bought a CU500 when I could afford to not carry a shitty phone, then bought a K850i when I needed faster 3G), so why should I pay the same as the person who’s received a $400 rebate in exchange for signing a contract?

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  10. The subsidies are for the cost of the handset, or in this case the netbook; not the monthly fees for service. If you paid full price for your handsets, you shouldn’t be locked into a two year agreement and you wouldn’t have to pay any early term fees if you chose to change service providers.

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