I see many advertisements for “Free PC’s” or rebates on computers if I sign-up with an Internet provider. They all seem to be “good deals” but what is the catch?
This question was answered on August 19, 1999. Much of the information contained herein may have changed since posting.
The marketing concept that uses a “FREE” offer is quite common in today’s business world Most of us, for example, get a “FREE” or discounted cell phone if we agree to sign up with an airtime provider for a period of time Internet based companies use the “FREE” model to generate “page views” of their web site so that they can sell this “traffic” to their advertisers In the case of the FREE PC’s, the deal usually consists of a roughly $400 rebate (which usually takes several months to receive) on a computer that ranges from $399-$799 To really understand the dynamics of these deals let’s first take a look at the service agreement that you must sign in order to receive the rebate The Internet Service Provider (ISP) will send you the rebate if you sign up for a 3-year period with them at a rate of roughly $20 per month If you do the math, you are committing to spend roughly $720 with them over the next 3 years They are willing to “rebate” $400 of the $720 if you sign the agreement On the surface, this looks like a pretty good deal You’re going to have to pay someone for Internet access for the next 3 years, why not get a free computer out of the deal, right? Well, maybe A couple of the current trends may make you take a second look Over the past year, dozens of small companies like NetZero (www.netzero.com) have been offering “FREE” Internet access in exchange for bombarding you with ads, but now some big players like the search engine AltaVista (www.altavista.com - currently owned by Compaq through its acquisition of Digital in 1988) are beginning to provide free access The chances of today’s business model for ISP’s being exactly the same 3 years from now ($20/month) is pretty slim We are starting to see the lowering of these rates already by a couple of dollars We are also seeing one year of free access from companies like Gateway and Dell when you purchase their computers Another issue that will bound to be much more prevalent in 3 years is something called “broadband” or high-speed connections Those of use that have had it for any length of time can not stand being on a computer that uses a 56k modem to access the Net It’s like driving around in a YUGO after years of owning Cadillacs! If you sign a 3 year deal, you may not be able to take advantage of these newer technologies without having to pay two providers or a severe penalty for non-fulfillment of the agreement The fine print on many of the agreements that I have read call for the return of the $400 rebate plus a $50 penalty in the event you do not complete the 3 year obligation It is not out of the realm of possibility that “broadband” connections will be $20/month 3 years from now
The other issue that is relevant today is the computer that you are getting for “FREE” Most are using the bottom of the line processors with no real path for any substantial upgrades For writing letters and sending e-mail, they will do just fine, but gaming, educational and graphics programs will bring them to their knees These machines will most likely not provide the kind of performance that you will want and need 3 years from now In the past 3 years, word processing and e-mail programs have changed dramatically and their minimum requirements from the computer and its operating system have increased dramatically as well No one knows what you will need 3 years from now, but chances are good that it will certainly be more than the bottom-of-the-line computer from the previous century! In my opinion, the only real winner in the PC for access deal is the ISP They get to tie users to a 3 year deal and eliminate the #1 problem that all ISP’s have; turnover!
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Posted by Ken Colburn of Data Doctors on August 19, 1999