Consumers on the prowl for new PCs may soon find themselves heading for the local wireless carrier instead of a big-box retailer. In a move that could dramatically change the way people shop and pay for computers, AT&T (T) and other mobile-phone service providers are swooping in on the PC retailing business.
One of the earliest signs of this shift came Apr. 1, when AT&T began selling small laptop computers in Atlanta and Philadelphia for as little as $50 to people who also signed up to get at-home and mobile broadband services for two years. It was no April Fool's joke. AT&T, the biggest U.S. phone company, is 'very pleased with the early results' and is considering introducing the offer nationwide, says David Haight, vice-president of business development for emerging device organization at AT&T. He wouldn't provide details on the results so far. Rival Verizon Wireless plans to offer small, inexpensive laptops called netbooks to customers this quarter. Other carriers are expected to follow suit.
With the market for cell-phone service saturated, the PC market represents a way for mobile-phone carriers to get more people to buy monthly wireless Internet-access service plans. Consumers who buy wireless Web access can save money on the up-front purchase price of a computer and, in some cases, the price of monthly access to high-speed Internet services. But the shift in who sells PCs could also mean lower revenue for computer makers if it lures buyers toward lower-priced netbooks and away from big-ticket machines. It could also crimp demand for smartphones.
Bundling netbooks with service plans
Wireless service providers are already emerging as big PC vendors in Western Europe, where companies like Vodafone (VOD) and Deutsche Telekom's (DT) T-Mobile International began selling netbooks last fall. Carriers already account for 20% to 25% of all small laptops sold there, estimates Richard Shim, a research manager at consultant IDC (IDC). The U.S. may not be far behind. PC maker Dell (DELL) and retailer RadioShack (RSH) began selling netbooks for use with AT&T's wireless network several months ago.
Carriers are willing to absorb $200 or more of a netbook's cost to get more people to sign up for related wireless data-service plans as well as other offerings. AT&T, for instance, offers discounted netbooks to people who also sign up for a $60-a-month bundle of its at-home Digital Subscriber Line Internet access and its on-the-go broadband service. In one of several deals, AT&T sells the Acer Aspire One netbook, which normally retails for $300, for $100 up front.
The emergence of carriers as computer distributors could spell changes, good and bad, for PC suppliers. On one hand, consumers who may not have bought a $500 PC may be tempted by a $50 one. 'It's about getting the next billion people online,' says Anil Nanduri, director of netbook marketing at chipmaker Intel (INTC). 'We see this as a definite opportunity for additional volumes,' especially in emerging markets, he says. Researcher IDC expects netbook sales to rise from 19 million units this year to 32.6 million units in 2012.
Mobile-phone service providers and their marketing muscle could also help their computer making partners grab market share quickly. T-Mobile, for instance, has sold 60,000 netbooks since making them available in September. 'You could get quick market share, provided you work well with a telco provider,' says Shim. Such companies as Acer, Dell, Samsung, Hewlett-Packard (HPQ), and LG"”which have announced wins with AT&T, T-Mobile, and Vodafone"”could end up climbing the market-share charts.