Money For Nothing, and the PC’s Free..

I recall my surprise when,
at a London store in 1995, I found mobiles going free with 5 after-shaves.
I bought the bottle but didn’t get the phone…I’d have had to pay for the
Orange cellular service in the UK for two years. Actually, it’s commonplace.
Take a DoT connection: the phone’s free. With Mobilink, get the pager
free.

In the West, such contracts are enforceable,
so you actually get the handset free with a $20 service. In India, they’re
not, so you pay upfront for the hardware–and get free airtime. It’s "like
having the handset free", but not quite.

I was amazed in the US early this year
by a company called Free-PC, giving away 10,000 free PCs. With
free
ISP accounts. Like our DESU or BEST electric utilities giving you free
airconditioners
and the electricity…as long as you viewed some
ads. Or Siti Cable giving free TV sets–
and cable connections?

Free PC deals are flooding the US market.
US start-up E machines gives PCs free with CompuServe ($30 monthly, three
years). Free Mac has a half-million wait-list for, you guessed it, free
iMacs.

How does it work? PCs with free ISP accounts
are common, the economics easy. 25-hour ISP packs retail at Rs 900: a
bulk buyer pays a tenth of that. The vendor gets a value-add, the ISP
gets volumes, and many buyers convert after the 25-hour trial. A bare
Rs50 margin for bandwidth and support, but the volumes are worth it.

Things get livelier the other way around,
though India hasn’t caught on yet. The Indian-run Gobi Inc gives PCs free
with an ISP account at $26 a month for three years, plus $90 initial fees–over
$1,000 from a buyer. CompuServe has a $400 discount for a three-years
signup, enough for channel partners to pack a low-end PC in. If Gobi
et
al spend $600 over three years (on hardware plus access) that leaves
a $400 margin–not bad, except that the hardware cost is upfront, but the
monthly fee comes in over three years.

Model #3: free PC and
free access, and a stream of ads–as with Free-PC and FreeMac. Revenues
are tight. Most ISPs make little money from ads, about $1 a month per
subscriber. Such companies are spending, for now, to build up market presence
and a database, get investors, and perhaps head to an IPO.

PCs with accounts are common in India. Model
#2 is a year away. Model #3 will happen only with cheap set-top boxes–not
before 2001. But the volumes could break the conservative million-a-year
PC projections. So here’s hoping someone proves me wrong on the timeline.

PKR@CMIL.COM

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