Telecom-Subsidized Netbooks: What Do They Really Cost?

By John Jacobs - Director, Notebook Market Research, DisplaySearch

In recent months, both AT&T and Verizon, the two largest telecom providers in the US, began to follow the lead of telecoms in other nations and offer subsidized netbooks. The plans are not unlike their typical mobile phone plans. If you sign a two-year contract, the telecom will provide you with sell you a netbook, or in some cases a notebook PC, at a slightly discounted price. An additional point of similarity is that mobile phone brands are also considering supplying netbooks to service providers. So, are these offers a good value? First, let’s examine the current offers from AT&T and Verizon.

AT&T

As we noted, AT&T test-marketed the Acer Aspire One with a two-year data plan through Radio Shack stores in December 2008. According to their website, available service is currently limited to the Philadelphia and Atlanta markets. The two-year contract has two options. The least expensive of the two is $40 per month for 200 MB of data. The more expensive plan is $60 per month for 5 GB of data. And of course, there are substantial fees for exceeding the data limit. AT&T offers a wide range of devices:

• Acer Aspire One: 8.9″ display, 1.6GHz Intel Atom CPU, 160GB HDD, and a 3-cell battery for $199
• Dell Mini 9: 8.9″ display, 1.6GHz Intel Atom CPU, 8GB SSD, and a 4-cell battery for $249 (Note: This product no longer appears on Dell’s web site.)
• Dell Mini 12: 12.1″ 1280×800 display, 1.6GHz Intel Atom CPU, 40GB HDD, and a 4-cell battery for $449
• LG X110: 10″ display, 1.6GHz Intel Atom CPU, 180GB HDD, and a 3-cell battery for $349

Verizon

This telecom service provider is doing a bit of a media blitz, with primetime TV commercials touting the “connectivity of a laptop with the mobility of a wireless phone.” The company’s website states that the device is “ideal for cloud computing using online applications and file sharing.” Verizon’s data plans are almost identical to AT&T. Verizon is also trying to bundle cell phone sales with the netbook by offering a “free” LG VX5500 or Samsung Trace phone with the deal. The cell phone requires its own, additional two-year contract. Another difference from AT&T is that Verizon’s least expensive plan gives slightly more data than AT&T (250 MB compared to 200 MB of data). One major difference is that Verizon offers a 4G/3G combo plan for $80 per month. But unlike AT&T, Verizon is only selling one netbook:

• HP Mini 1151R: 10.1″ 1024×576 display, 1.6GHz Intel Atom CPU, 80GB HDD, and a 3-cell battery for $199

Sprint

This telecom provider is not currently bundling netbooks with data plans. They do offer data plans for netbooks and notebook PCs via a USB dongle and the data contracts are quite similar to AT&T and Verizon:

• 5GB/month for $60 with a 3G connection
• 4G is unlimited, 3G limited to 5GB/month for $80

Other Regions

In other countries around the world, telecoms have been offering subsidized netbooks for several quarters. Carriers in the UK are becoming increasingly aggressive with their offers. O2, Three, T-Mobile and Vodafone all have netbook bundles. All are subsidizing 100% of the cost of the netbook (Samsung NC10 (10.2″ 1024 × 600, Intel Atom CPU, etc.)

Vodafone: 2-year data plans, 1 GB data plan for £25 (~$41) or 3 GB for £30 (~$49)

T-Mobile: 2- or 3-year data plans advertised as “Unlimited Mobile Broadband” but with a “fair use policy of 5 GB of downloads per month.” The cost is £30 (~$49). For £5 more (~$8), the buyer can get the “Unlimited Mobile Broadband* + Unlimited Weekend Texts” plan. For £5 less (~$8), the buyer can get the “Unlimited Mobile Broadband* + 200 Text Messages” plan.

O2: This carrier has both “personal use” and “business use” plans. The “personal use” plans are both 24-month contracts. The 3 GB data plan costs £29.38 (~$48), while the 10 GB costs £39.15 (~$64) for 10 GB.

Total Costs

How much will these bundled netbooks cost the user over the two-year life of the data plan?

• The least expensive option (AT&T plus the Acer Aspire One or the Verizon HP Mini) costs $1159 before sales tax and all of the monthly telecom taxes are added.
• At the upper end of the range, the total two-year cost-again, pre-tax-is $1889.

Also, the netbooks offered by AT&T and Verizon have embedded mobile broadband. That is, you cannot remove the SIM card and use it with any other notebook, like you could do with a USB modem, PC Card, or ExpressCard. Research from NPD indicates that many netbook buyers are using netbooks as secondary PCs. An external antenna would free the consumer to carry either their netbook or a larger notebook with them depending upon their needs, as opposed to being tethered to a netbook for their connectivity.