Subsidized Netbooks' Potential Seen
By Doug Olenick -- TWICE, 6/5/2009
New York — The advent of cellular-carrier-subsidized netbooks could help make these chains a player in the mobile computer market.
In May, Verizon Wireless and AT&T announced each would start selling netbooks using the same subsidized model that helped grow the cellphone industry. There is a track record for subsidized netbooks, as this system has helped drive acceptance of these already popular devices in Europe, Latin America and Asia, according to several research groups. Now The NPD Group and Gartner see the potential for carrier stores to become an important cog in the U.S. computer retailing scene.
While Stephen Baker, industry analysis VP for NPD, said he does have some doubt about whether the subsidized model will take off in the U.S., a successful implementation of this program could have an impact throughout the portable computing market.
“Carriers have potential to be disruptive in the PC supply chain. If the subsidized model takes hold, the carriers have proven through their phone business that they can outsell and out-advertise the regular retail channel. There is real potential for that to happen here,” he said.
This path may not be easy. The carriers have to figure out customer habits on the fly, and gaining customer loyalty from established chains will not be easy, Baker said.
How far into the PC retail space the carrier stores will wander is hard to judge. A Verizon Wireless spokeswoman would not give any details on additional products the chain might sell nor future plans, but she did indicate that the current subsidized netbook promotions are a play for the consumer dollar, unlike the company’s enterprise efforts that center on selling USB-based cellular data plans and equipment that can be added onto any laptop.
The Verizon stores and website do sell a small variety of netbook accessories and adding more does make sense.
“They will become a larger channel in conjunction with selling/bundling bandwidth contracts — as a stand-alone channel without the bundling of bandwidth is less likely. Attaching other products to the PC sales is likely since that is a good revenue and profit generator for phones today,” noted Tiffani Bova, Gartner’s research VP.
AT&T did not respond to a request to comment for this story.
The long-term impact carrier-sold netbooks will have on the market is also hard to judge at this early stage. Baker thinks there could be a negative reaction by the netbook vendors.
“While the PC OEMs are happy to cooperate today with the carriers, they are likely very wary of the difficulty of maintaining product value when the pricing for their products is continually subsidized.,” he said, adding there could be a negative ripple effect through the entire notebook portfolio if subsidized netbooks succeed.
