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Elgan: Why netbooks will soon cost $99

Prediction: The era when subnotebooks are subsidized like cell phones is here -- almost

October 31, 2008 12:00 PM ET

Computerworld - Subnotebooks like the Asus Eee PC, the Dell Mini 9 and the HP 2133 Mini-Note will soon cost as little as $99. The catch? You'll need to commit to a two-year mobile broadband contract. The low cost will come courtesy of a subsidy identical to the one you already get with your cell phone.

The Wall Street Journal reported yesterday that HP is already talking to carriers about such an arrangement but didn't say which carriers. And you can bet that if HP is talking to carriers, so are the likes of Dell and Asus.

It's likely that HP is talking to AT&T, which has already inked a deal with Lenovo and Ericsson to sell full-size ThinkPads at a $150 discount if customers sign up for a two-year contract. That discount brings the price of a ThinkPad with Ericsson built-in mobile broadband modules down to essentially the same price as one without that capability.

The ThinkPads in question are not netbooks. But the deal shows in concrete terms what a mobile broadband contract is worth to the industry: $150. If you were to apply that figure against the total price of the cheapest netbooks today -- which are about $300 -- you can assume that under existing circumstances, a subsidized netbook would cost you out of pocket about $150.

AT&T also announced a major strategic shift a couple of weeks ago that should result in AT&T stores selling nonphone gadgets that can take advantage of mobile broadband, including netbooks. In other words, the cell phone sales model, where hardware is steeply discounted to encourage wireless contract commitments, is going to be applied by AT&T to devices that are not cell phones.

While AT&T leads the U.S. market in pushing for subsidized notebook deals and also at least talking about mobile broadband netbooks that may be sold like cell phones, the carrier's competitors have their own special incentive to get on the subsidized netbook bandwagon.

AT&T holds a monopoly on Apple iPhone sales in the U.S. According to comScore, low income and cheapskate buyers are starting to use iPhones as replacements or substitutes for netbook, notebook and even desktop PCs. The report says iPhone sales for this purpose are "the strongest part of the iPhone's growth since July."

What that tells me is that a very large number of people are increasingly looking to buy a single device -- or, at least, subscribe to a single wireless account -- for all their computing and communications needs, and at the lowest possible price.

One way other carriers can compete with AT&T for these contracts is to offer very low-cost netbooks outfitted with VoIP capability or, more likely, cell phone/netbook combo deals where for, say, $200 you get a cell phone, an Asus Eee PC and a wireless contract that covers both devices.



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