The Great Netbook Ripoff

Analyst Opinion – Netbooks are the new cellphones. At least that’s what
wireless carriers want you to believe. And as they try to convince us
that we should buy them under the same terms we’ve been buying regular
old cell phones for years – namely, get them for a ridiculously cheap,
subsidized up-front price in exchange for a two-year service contract
commitment – we’d do well to be cynical. There’s no such thing as a
free lunch, and that so-called bargain could cost you well into
four-figure territory by the time your contract is up.

As always, you need to look at the numbers and ask yourself some hard questions about how you plan on using your hoped-for purchase. First, the average netbook retails for around $300 to $400. While you can pay less for stripper models and more for full-blown machines from top-tier vendors, this is where the current sweet spot of the market is.

Second, at that $300-to-$400 price, there isn’t a whole lot of room for profit for either the hardware vendor that designs and builds it, the store that sells it, or the software developers who build the operating system and software suite that powers it. So as much as we’d like to see that baseline move quickly down to $250, $200 or, gasp, $100, it won’t happen anytime soon. And when it does, entire chunks of the supply chain will need to be either stripped out or completely turned on their sides. Welcome to the world of free operating systems, free software, and parts vendors you may never have heard of.

To stoke the interest of increasingly jobless consumers more interested in holding onto their homes than in buying shiny new objects, carriers are partnering with hardware vendors to “sell” subsidized netbooks for little more than the cost of dinner and a movie. AT&T raised a ruckus earlier this spring with a regional $99 netbook offering. Now Verizon’s joining the party just as AT&T expands its program nationally. The new lowball figure? $49.

For that bargain, you’re now tied to your carrier for at least two years. Sure, now you can surf wherever you want – precious freedom from Wi-Fi tyranny! – but don’t be watching hours of YouTube because you’ll blow through your lousy 500 MB/month limit before lunch is served. They’d be happy to upgrade your monthly account to something with, say, 5 GB of data, but that’ll cost you even more.

If you’re a road warrior and you absolutely need to get work done while on the go and don’t often find yourself conveniently within Wi-Fi hotspots, then by all means take a look at a subsidized 3G-capable netbook, because nothing else in today’s market offers anything close to this level of on-the-go capability. But if you’re looking for a cheap way to score a bargain on a netbook and already spend most of your time using known Wi-Fi access points, stay as far away from these subsidized offerings as you possibly can.

As always, carriers remain hopeful that you’ll be too dazzled by the low, low price to bother reading the fine print. Don’t give them the satisfaction.


Carmi Levy is a Canadian technology analyst and journalist covered with scars from his years leading IT help desks and managing software development projects for big bad insurance companies. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.