Verizon Wireless is expected to launch its long-awaited Netbook from Hewlett-Packard on May 17, according to a report from the blog Boy Genius Report.
The blog said the company will be offering the 115NR Netbook from HP with wireless broadband capability for $199 after a mail-in rebate. The subsidized device will come with a two-year service contract that will likely set users back $40 to $60 a month, the site said.
Verizon declined to comment on these most recent rumors. But the company confirmed earlier this year that it is planning to launch a Netbook on its network.
The big question now is whether consumers will actually buy the device and agree to a hefty service contract. Pricing details for the 3G wireless service aren't known yet. But Verizon currently charges $40 a month for a laptop data plan that offers 50 megabytes worth of data each month. And its $60-a-month plan offers 5 gigabytes of data downloads every month.
If the Boy Genius blog is accurate about the $199 price tag for the Netbook, and Verizon sticks with its current data plan pricing, Netbook users can expect to spend $1,160 to $1,640 over the life of the contract for the service and Netbook, depending on which plan they choose. (This doesn't include taxes or fees.) Considering that HP's Mini 1000 Netbooks retail for about $300 without a 3G service contract, this might seem a bit much for some consumers to stomach.
It's clear that Verizon sees Netbooks and other wireless-enabled devices as its future. Today, nearly 85 percent of the U.S. population owns a cell phone. As this penetration rate approaches 100 percent, it's unlikely that cell phone operators will experience much new growth simply by adding new cell phone subscribers.
In fact, the bulk of Verizon's new wireless customers in the most recent quarter came from its acquisition of regional wireless operator Alltel. If Verizon had owned Alltel in the first quarter of 2008, Verizon's subscriber base in the first quarter of 2009 would have only grown 3.3 percent year-over-year.
Other wireless providers are in the same boat. And they are also looking for new ways to generate revenue. Sprint Nextel, the nation's third largest wireless operator, provides the wireless service for Amazon's Kindle. CEO Dan Hesse said during the company's first quarter 2009 conference call that he sees devices like the Kindle providing a big boost to the company's wholesale business.
AT&T, which has already been offering subsidized Netbooks on its network, is also interested in expanding its business opportunity with wireless-enabled devices. As a result, the company has established a new business unit, which is tasked with finding new consumer and embedded devices to use AT&T's wireless network.
But in order for these wireless companies to be successful, they will need new business models. Ralph de la Vega, president for AT&T mobility, recently said as much at the CTIA tradeshow in Las Vegas.
"We need to be more flexible," he said. "This is a new frontier. And we need to approach it with new ideas. We can't be forced to go down an old path."
But when it comes to Netbooks, it looks like AT&T and Verizon Wireless have simply taken a page out of their own cell phone playbooks. AT&T is also charging $40 to $60 a month for data service. The idea is that the companies subsidize the devices, and then make up that subsidy quickly with a hefty monthly service charge.
To their credit, this business model has worked well in the cell phone market. But I don't think they will find the same success as they try to expand the wireless services market to include other devices. And the reason is simple. A cell phone is essentially useless without a voice plan. And in order to ensure consumers sign up for expensive data plans, some new smartphones, such as Apple's iPhone and Research In Motion's BlackBerry devices, require users to sign up for data plans.
But Netbooks and other devices, such as digital cameras, Netbooks or MP3 players, can be used without connecting to the Internet wirelessly. And many of these products already come with Wi-Fi, which can often be accessed for free and without a lengthy contract. What's more, these devices can also be bought easily through other retailers.
For these reasons, I think it will take more than a $100 subsidy to get consumers to sign up for these Netbook deals. Verizon and other wireless operators will have to rethink their business models, especially in this economy when people are looking to reduce their monthly bills. Cheaper data plans could certainly help.