Subsidized Laptops With Locked In Wireless Broadband Contracts

from the good-or-bad? dept

Tue, Dec 16th 2008 10:22pm — Mike Masnick

A few years back, after noting the trend of laptop companies to start building in cellular data modems into their laptops, we wondered when it would reach the stage where mobile operators would subsidize the cost of a laptop, just as they subsidize the cost of mobile phones in many cases. In early 2006, we started to see such subsidized laptops go on sale in Europe, with the mobile operators selling the laptops directly for well below list price, as long as you bought into a long term data plan. The whole idea seemed a bit strange, as mobile operators have long ranted long and hard about how much they hate, hate, hate subsidies, and how they wish they could do away with them. So, why add them to laptops?

However, the idea has now traveled over to the US as well, in a deal between Acer, Radio Shack and AT&T allowing people to buy an Acer netbook for just $100, so long as they agree to a 2 year $60/month contract for an AT&T mobile data plan. It's still a little confusing as to why the mobile operators are agreeing to this, following so many vehement arguments against mobile phone subsidies, but perhaps they're finally realizing that those subsidies aren't such a bad thing when they get people using their services. Still, how long will it be until buyers start complaining about early termination fees for laptops like they do for mobile phones?

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Filed Under: contracts, netbooks, subsidies, wireless broadband
Companies: acer, at&t, radio shack

24 Comments

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Anonymous Coward, 17 Dec 2008 @ 3:27am

Complain about subsidies when I can outright buy a phone for your service at full price and not have to be locked into a contract. I'm sure there's people out there that wouldn't mind paying full price for a phone or bringing their own phone over to a provider if they didn't have to be trapped for 2 years.
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OneDisciple, 17 Dec 2008 @ 3:40am

Why contracts
I hear people complain about contracts and cell phones all the time, but what I cannot figure out is why. Why use their service if having a contract is so terrible? Why complain all the time about being trapped? I don't know maybe it is me but I could terminate my contract whenever I want, but where would I go? AT&T has been good to me and I would not use any other service provider. So I sign a new two year contract to get a new phone every time. Where is the problem. Vote with your dollar. If you do not like contracts don't sign any use one of the alternatives, or just stop ranting about your own actions. I am not speaking to any one in particular just ranting myself.
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Kevin, 17 Dec 2008 @ 4:00am

Only one porblem OneDisciple
With many carriers it is difficult (if not impossible) to bring your own phone to their network. Even if it is compatible, most carriers make it very difficult (or even impossible) to get your phone set up for use with their carrier. They would prefer that they sell you a subsidized phone with contract that is locked to their network and often times has the more useful features blocked from being used.

If it were possible to simply buy a phone and take it to whatever carrier, then I wouldn't have a problem with that.

Te other issue is that usually the most desirable phones (iPhone, G1, etc) are given to carriers in an exclusive deal. So the only way to get one is to sign on the dotted line.
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Anonymous Coward, 17 Dec 2008 @ 4:38am

So, here's what I don't get. It's $100 to buy the laptop, and then a garanteed $60/mo for two years, or another $1440 in monthly payments. Now, granted, you get whatever this data plan is, but why is this necessarily better than just financing the laptop? Most placed I've been already have systems for that available.
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Alpha Computer, 17 Dec 2008 @ 4:51am

As Long As We Have A Choice
If laptops go like cell phones, this might end up being a big headache. Business may see a way to make money with this. But will it be better for the consumer. We want choice and we don't want to feel like cattle herded into a coral.

For some this might be an option. But there must be choice.
I want to be able to choose what works for me. And by the way, just because Europe is doing it does not mean that we have to do it also. We could create a better idea that really works for everyone.
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Chronno S. Trigger, 17 Dec 2008 @ 6:40am

My Pap wanted a laptop
I was thinking about getting him one. $100 for a laptop with Win XP, sounds like a good deal to me. He wants one that can connect to the internet anywhere and he is presently on dialup so he wouldn't notice any slowdown. But I don't want to get him in a 2 year contract without his consent first.

Too bad these things have a 9" screen.
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Oliver Wendell Jones, 17 Dec 2008 @ 6:41am

Where did people learn math?
If you pay $100 down for the laptop and then $60/month for internet service for 2 years, then you're not paying $1540 for a laptop - you're paying $1540 for a laptop *AND* 24 months of internet service.

How much is the internet service if you don't get the $100 laptop? If the monthly internet service alone is more than $47.71 per month, then it's a good deal, contrary to what the people with no math skills tell you.
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:Lobo Santo, 17 Dec 2008 @ 6:56am

Re: Where did people learn math?
My unlimited cellular data plan costs me like $10 a month...

So, let's see, $350 computer + (24 x $10) = $590.

They can take their "2 year contract", fold it until it's all sharp edges, and shove up the wrong end of their one-way digestive system.
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Anonymous Coward, 17 Dec 2008 @ 6:57am

I bought a data card for my notebook and am paying $60/month for the service. Granted, my notebook is significantly more powerful, even if it is a couple of years older, but if you need the connection ability, this really isn't a bad deal.
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Anonymous Coward, 17 Dec 2008 @ 7:25am

I love stupid people
If you read the linked article, and the comments after it, one of their biggest complaints is that you end up paying $1540 for a $350 laptop, and that they don't see why anyone would do that. If you use their math then even someone who selects the absolute lowest package is paying $1680 for an 8GB 3G IPhone ($3800 if they want unlimited everything). Now what kind of moron would pay $3800 for an IPhone? They completely ignore the fact that you get a service that normally costs $60 per month (note that $10 a month unlimited data plans are for cell phones, not laptops) included with your $60 per month payments. So, if you are going to get the data card anyways, this is a great way to save $250 on a netbook. It looks like a great deal to me.
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Steve R. (profile), 17 Dec 2008 @ 7:28am

Re: Where did people learn math?
Excellent point.
Nevertheless, there is more to the story.

First, the consumer should be able to drop the service whenever they wish without facing any prepayment penalty. If companies can change their terms of service, as they wish, so should the consumer. If the company loses money selling the laptops below cost, too bad. (note I did not use the word "subsidy").

Next, these companies attempt to extend prepayment penalties even when you don't get a piece of real physical hardware that has value. For example Sprint said that we would have to sign-up for a new two year contract just to change our phone number! We said good-by to Sprint. Later, we were then informed through a class action lawsuit that Sprint made "errors" in their billing to us and that we were entitled to a $15 refund. But guess what - surprise, surprise - we would have to sign up for a new two year contract to get the refund. Of course we did not sign up. Clearly these "contracts" are more about locking the customer in and depriving the customer of their economic freedom than they are about "recovering" costs.
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hegemon13, 17 Dec 2008 @ 7:46am

Not the same...
Why are they doing it? Let's see, the cost of a low-end netbook is about $300.00. So, they are subsidizing about $200.00, which is less than the subsidy for a lot of phones. They are then getting a contract for a $60.00/mo plan, which is higher than most single-phone plans. Plus, they are providing data only. No voice services means no costly connection fees, etc, so the margins are higher. Within six months, their subsidy is paid for, as opposed to phone plans, where it often takes a full year or more to make back their money.
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hegemon13, 17 Dec 2008 @ 8:02am

Re: Re: Where did people learn math?
Why, exactly, "should" people be allowed to drop the service without the penalty when the phone company subsidized hardware? If that was the case, then sweet, I can get a $100.00 netbook any time and let the phone company pay for the rest.

There are definitely some problems. Early termination charges for contracts for which no hardware was subsidized should be illegal. The charges should be pro-rated based on the remainder of the contract. And, the charges should not be allowed to extend for as long as they do.
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Paul Brinker, 17 Dec 2008 @ 8:05am

I connect my Cell Phone to my laptop all the time, hit a button and have internet connection sharing, its slow but its enough to log on to a video game and say hi. This costs me 15 or 10 a month on sprint.

When I was buying my new laptop I asked sprint if I could have a built in card and pay some small fee to tie it to my account, but thay come back at me with a crazy high cost (40-60ish) instead of the 10-15 I pay for my phone that acts just like a wireless card.

Ultimatly I set my phone to connect to my computer via bluetooth when ever its in range which is MUCH cheaper then a data card.

The only way this system above could work is if the laptop was a mid-high end system, like a gamers laptop and the connect fee was low, or a one time charge.

Any cell phone rep out there, I would gladly pay 200 - 300 to have unlimited data on my laptop for several years.
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Mark Rosedale (profile), 17 Dec 2008 @ 9:01am

I was writing something up about this very thing
I was in the middle of writing up something on this very topic. http://bfpower.wordpress.com/2008/12/17/subsidized-netbooks/

It just does not make sense to me. There were very good reasons why cell phones were subsidized, but those reasons do not apply here. Tell me what you think
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mike, 17 Dec 2008 @ 10:35am

Re: Only one porblem OneDisciple
the reason that this will be somewhat financially successful is partly that the marketing will be extensive and partly because the average american consumer is not financially literate.

Add into that the number of people whose credit is not the greatest anyway and you what you have is a mega-sized group of people who feel that paying that 60/1440 is a good deal.

and don't forget that with programs like Vonage, Skpe,Magic Jack, etc. these same people can make calls using that computer and data plan. so this will intrude somewhat in the (and how I hate to call it this!) "traditional" cellphone market.
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mike, 17 Dec 2008 @ 10:36am

Re: Re: Only one porblem OneDisciple
oops clicked the wrong link. see comment below this one...sorry
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mike, 17 Dec 2008 @ 10:50am

Re: Re: Where did people learn math?
To Steve R:

first your contract is predicated on the use of that phone& plan, upgrading or original purchase of phone. Using your thinking I could go to T-Mobile sign up for a plan, get the G1 then bail out immediately. That would put TMO out of business, and the same for other companies.

Second the courts have already decided that a)changing terms of service is legal as long as there is not a material difference in cost or service during your contract time. That means that if you contract for 300 minutes at X price and overtime minutes at Y price for two years, that is all you pay. Once you pass that two year point your price can change. Upgrading your phone, pay services or insurance can legally trigger a new contract to obtain the best price for those items.

Third, changing your phone number is not a legally defined opportunity to materially change your plan/contract. I am sure some Sprint employee tried to do that because all telcom corporate policy is tied to the idea of locking you into a longer contract. However they cannot legally require a new contract on a number change. They can charge you a fee to change the number but not force you into a new contract.

Sprint is notorious for bad business practices such as that. TMO has the best rep and cust service rating of all of them and frankly I can change/add/delete services on line with them online at 3 a.m. and know that unless it is clearly marked as triggering a new contract there will be no additional charges. I Have been with them since their beginning and there has NEVER been one mistep in any upgrade or service request.
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Shoshana, 17 Dec 2008 @ 11:04am

Something to think about
Most or all of the carriers have started imposing limits on how much data you can download using phone as modem or using a broadband card. Most of them are 5 Gb limits which is ok if all you do is check mail and surf some.

I'd check on limits before I signed up...
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Avatar28, 17 Dec 2008 @ 2:28pm

AT&T not involved
Sorry, I don't have the link handy. But when I was reading on this a couple of days ago, they had a statement from AT&T to the effect that they are not involved and don't really have anything to do with it other than providing the data service. My guess is that the subsidy is not specifically for the laptop but more of a kickback that AT&T gives to retailers who sign a customer up for a two year data contract.
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Paul Brinker, 17 Dec 2008 @ 4:51pm

Data Contract limits
I signed up for the "Unlimited data plan" if sprint wants to tell me its not really unlimited then by god there eather changing the terms of my contract (which allows me to get out of said contract) or thay lied to me and Ill have a nice talk with the legal department about telling someone something is umlimited and then going around there backs and saying its not.

To be honest Qwest sold me the same thing, Unlimited 150kB/s with a price lock even, And to be honest, they kept there bargan and I have almost aways had that data rate (at least im not having fake packets reseting my connections)

The day anyone says something thay sold you isent quite what they sold you, is the day your free to brake your contract because the company already did.

Keep in mind im a power user, I use my home computer to stream video to my cell phone etc. So I really expect to get what I pay for.
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M Schenkel, 24 Feb 2009 @ 6:56am

Try "
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M Schenkel, 24 Feb 2009 @ 7:02am

RovAir OnDemand
I do some work with a company called RovAir (www.rovair.com). Their specialty is renting aircards. They recently started a program called "RovAir On-Demand". This program allows you to activate your aircard only when you need it, thus avoiding the 2 year contract. They use the Sprint and Verizon networks.
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Wireless Internet card rental, 19 Apr 2009 @ 11:16am

Aircard rental
Now the wireless internet is becoming very popular in world. The main reason is that you can access it any where and on very reasonable prices. Wiress internet card rental
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