Blog Post

Subsidized Netbooks = Bad Idea

Verizon (s VZ) may soon join AT&T (s t) in selling subsidized netbooks, Bloomberg reported this morning. Under such a plan, Verizon would sign partnerships with netbook makers to subsidize the devices for consumers who sign data contracts. (The majority of cell phones in the U.S. are sold this way.) Verizon hasn’t returned my calls trying to confirm this news, but pushing the widespread use of 3G networks on subsidized netbooks is a bad idea. It may not even work. Do the math: $200 or $100 off a $400 netbook doesn’t offset taking on a two-year commitment to a $60-a-month data card contact, which adds $1,440 without taking into account fees and taxes.

I wouldn’t mind, but my data plan is a work expense, not a personal one. For most people, an additional $60 on top of cell phone and home broadband costs is likely cause them to cut back somewhere — or cancel the netbook contract and pay a termination fee. But the primary reason this is a bad idea is because surfing speeds on today’s 3G networks are super slow (I get about 1 Mbps down on a great day and have dealt with speeds as low as 80 kbps down). This will lead to unsatisfying experiences for the average user.

Others argue that folks using data cards for access to the network are likely to come up against their 5 GB-per-month cap, but I’m less sure. The top two U.S. cable firms tell me that their wired broadband customers average about 2 GB per month in downloads, and that’s without a crippled, not-really-broadband connection.

I love my EV-DO card, but it’s not a great web surfing experience, especially during times when the cell network is congested, or for watching video and updating the blog via WordPress. So I am less worried about overage fees and more concerned that those buying netbooks will pay $60 for a connection that’s sometimes worse than dial-up. That’s no way to get people hooked on mobility, and carriers may alienate customers right before they start making big pushes into faster 4G data services.

17 Responses to “Subsidized Netbooks = Bad Idea”

  1. tvlampsn

    This idea will work. You’ll see AT&T, Sprint, Verizon, T-Mobile and even Leap and MetroPCS get into the business. Actually everyone is going to be doing it as cable companies invest more in Clearwire to be able to tap into Wimax integration as a quad-play for their customers.

    If you aren’t familiar with technology or computers this is a great way to get a computer and get service. For $99, plus $60/month you get metered internet access. For checking email, and web surfing this is more than enough. If you want to watch movies and stream video it may not work.

    The real key here is portability. You’re able to access the web in airports, on the road or anywhere else and still be able to hook back up when you get home. For the same $60/month you’re getting a setup that will look the same as your cell phone and that’s what people want. At first people didn’t like only having 200 minutes for $39.99 but in time, the service got cheaper, but you got a better value service.

    This is what you can expect from wireless broadband. Things are going from DSL right to wireless 3G (4G with Wimax/LTE). Fun times ahead.

    Chance Stevens,

  2. I actually like the idea. I think people are aware of the bandwidth limitations of a 3G network. Why don’t we let the markets decide?! It might make sense for people who would have gotten the data plan anyways.

    It would be nice if we could have ONE universal broadband plan which would let you connect your laptop, cellphone or netbook.

  3. the appeal to consumers here has all to do what the final deals look like. if subsidies are similar to high end smartphones it means the netbooks should be free with a two year contract. i would like to see verizon also offer a dat plan for those of us who own netbooks that we paid full retail for; these contracts should be significantly cheaper since no subsidy if involved. also will we be able to share the connection via ethernet or wifi? this would certainly add value.

  4. ajolie1

    Don’t you just hate the carriers. Always, and I mean always, trying to get customers hooked on expensive long term contracts like pushers try to get their customers hooked on drugs.

    When will we ever get an open IP wireless network? Now this would really be a revolution.

  5. in India @ 256kps is tops even in land connection :-) looks like it will take off here first. But the 3G regulations are still atleast 9 months aways! Guess the netbooks will be $250 then … $ 100 netbooks with a plan should be possible. Will be neat in India!

    • Stacey Higginbotham

      MJ, i have asked but it’s a number they don’t give out. I’m a much bigger fan of the median too. I can tell you Time Warner says Austin’s average is 6 GB per month, while the national average is 2 GB per month. Austin is a pretty web savvy place and a college town, if that means anything.

  6. i sell very cheap used computers. lately it seems like mobile broadband is by far the most popular way for my customers to subscribe to internet(although that is a minority; most of my customers either freeload a neighbors open wifi point or only access internet on their laptop out and about at coffee shops, etc.) i hear very few complaints about speed or other quality of service issues. most are using criket though and only pay $35.00 per month prepaid. if verizon were to offer something at that monthly price point without an extensive credit check it may take off. i do see the 5GB limit being a bigger issue over the longer term as many people are just now starting to get into p2p file dowmnloads; in paticular it is file sharing that is attracting peiople to the internet who have been traditional ‘unconected.’