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Analysts See More Free-Netbook Promos

7/07/2009 04:32:02 PM Eastern

New York - Carrier-subsidized netbooks were promoted
nationally by retailers for the first time in recent days, but it won't be the
last time, some analysts said.

"The subsidized 99-cent netbook is here to stay," said
Strategy Analytics analyst Bonny Joy, noting that subsidized netbooks were
promoted at 1 euro during Christmas in Western Europe.

Last week in its national inserts, RadioShack promoted a free Acer Aspire
One with AT&T 3G data plans starting at $60/month with two-year service
contract. The model this week returned to its regular $49 subsidized price. The
device is also available without 3G service at $349.

For its part, Best Buy
promoted Hewlett-Packard's Compaq Mini 110c-1040DX for 99 cents with Sprint two-year
3G data plans starting at about $60 a month. The netbook is also available at
$389 without 3G service. With either Verizon Wireless or AT&T 3G service,
Best Buy promotes the same netbook at $199.

Previously, carrier-subsidized netbooks have been available
in the U.S. at subsidized prices of $49 to $199, depending on the monthly
data-plan price.

The free and almost-free promotions are appearing now in
part because carriers' 3G networks offer better coverage than they did only a
year ago, and the economy is driving some consumers to consider netbooks as
replacements for desktop and laptop computers, said ABI
Research senior analyst Jeff Orr. As the back-to-school season approaches,
"we'll see more [free and 99-cent] promotions," he added. 

Carriers also see 3G-equipped netbooks, as well as other 3G
devices such as wireless modems and Amazon's Kindle e-book reader, as a way to sell
more subscriptions at a time when the vast majority of Americans already own a
cellphone, Joy added. "In Western Europe and the U.S., there are very limited
prospects for new subscribers, carriers have spent billions for spectrum, and their
voice revenues are falling," Joy said in explaining carriers' push to drive up
data revenues.

The free and 99-cent recent promotions, added NPD industry
analysis VP Steve Baker, underscore the fact that "everybody is still
experimenting with the right way to do this [market subsidized netbooks]." With
subsidized netbooks available only for a few months, he said, "August will be a
great test" of the products' potential.

Joy of Strategy Analytics believes sales of subsidized
netbooks will catch on, but "they will not substantially boost sales like free
phones did." Only about 1 percent of existing cellular subscribers are likely
prospects for buying subsidized netbooks because the total cost of ownership,
including monthly service, "is still very high," Joy explained.

Joy also pointed out that consumers also have many other
mobile-data options, including Wi-Fi hot spot service, wireless-data modems and
battery-powered handheld Wi-Fi routers that connect to 3G networks.

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