Take a good look at the PC market today because when it comes to buying a home PC, things may never be the same again.
The entry level PC market is looking to take the same route as the mobile phone market, which changed dramatically three years ago when the first ridiculously priced handsets were offered, tied to a service contract of course.
In the past few weeks both Tandy Electronics and Harvey Norman have launched basic PCs tied to two-year Internet access contracts, with up front payments of $499 and $399 respectively. Both deals offer a two-year unlimited Internet access contract charged at $49.95 per month.
National department store Myer/Grace Bros has followed suit, announcing in a newspaper advertisement on June 13, that consumers should wait for the best deal yet, due to be unveiled June 24. The details were sketchy, but it is now reported Myer/Grace Bros will offer a Hewlett Packard Pavillion PC priced at $299, with Optus Internet access charged at a monthly fee of $79.95 over three years.
$0 PC in two weeks
Tony Gattari, general manager of computers and communications at Harvey Norman is warning consumers to wait for an even better deal - a zero dollar brand name PC, which should debut in around two weeks.
This weekend Harvey Norman will also begin offering brand name PCs from IBM, Compaq, Toshiba and Hewlett Packard, with a $650 discount if customers enter into a two-year Internet access contract, Gattari said.
Such price points are possible because ISPs such as One.Net, EISA and Optus, who are involved in the deals, are offering PC dealers kickbacks - money for each Internet access contract entered into by customers.
This, says Gattari is a concern to retailers. "Subsidisation actually allows anyone to get into the marketplace," he said.
"We'll see a change in the people that sell PCs, there's no doubt that Strathfield Car Radio and Ryda Communications will enter the marketplace."
"And there's no doubt that the ISPs themselves will certainly have a greater involvement with the consumer. So the rules of the game are being changed as we talk."
Investigate before you sign
Bernie Esner, an analyst with market research company IDC, suggests consumers investigate the deals before they sign.
"For people to get up and running, I think it's a good thing, but over 12 or six months usage, you know the short cuts," he said.
"If you look at the Harvey Norman deal, over two years, you pay $1600. Do you buy Harvey Norman's $999 Signature PC, add a modem and Net access? What would be cheaper? I think the $999 PC would be."
Also consider the limitations on the Internet access provided, said Esner.
"There are contractual obligations, it's like everything -- with a phone contract, there are additional charges."
The Internet access included in Harvey Norman's PC deal is provided by One.Net, and certain limitations apply. Users are given unlimited hours, but limited free downloads to 100MB per month, each additional megabyte is charged at 25 cents.
Tandy Electronic's PC/Net deal, the EISA PC, offers unlimited hours, downloads and e-mail storage from EISA, without any extra charges.