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5/22/2009
02:20 PM
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A Third Front For Computer Hardware Sales

Following AT&T's April announcement, Verizon debuted this week its own plans to sell deeply subsidized netbooks, thereby confirming that cell services will follow retail stores and the Internet as outlets for selling computers.

Following AT&T's April announcement, Verizon debuted this week its own plans to sell deeply subsidized netbooks, thereby confirming that cell services will follow retail stores and the Internet as outlets for selling computers.This raises marvelously convoluted questions about brands, in at least three ways:

First, are the hardware makers really selling computing tools or communications devices? I'd wager that PCs (and Macs) are glorified music and video players for a large percentage of users, as most of the calculating power embedded in those chipsets never gets used for anything past promises in advertising. Netbooks are purposefully under-powered, but they're still atomic bomb-level answers to slingshot problems. Maybe the computer brands become more like appliance brands, retailing multiple specialized gizmos instead of boxes intended to do multiple tasks?

Second, price. The AT&T and Verizon netbooks are heavily subsidized, just like the loss-leader mobile phones they also retail. So what does that do to the value proposition for all the other computers on the market? Once you share, or divide, the ways to cover the cost of a product, you also dilute consumer perceptions of said value(s). I can't say that I believe my mobile phone hardware has any value, really. Might these new retail deals suggest new ways to price other hardware offers (like leasing computers from Dell instead of buying them outright)?

Finally, the bugaboo of service is the 800 lb. gorilla in these distribution models. I've written in this blog about the challenges to customer service when a device is made by one company, another company supports its communications functionality, and a third business manages the site(s) through which the functions function. Getting help is like playing a game of corporate hot potato: each component of the offering can work perfectly, even if together they fail. It will be interesting to see how AT&T and Verizon handle service on their netbooks (because, in the end, I say the ultimate seller/distributor holds the bag on support).

As fellow watchers of these business moves, do you think that this "third front" for computer distribution could be the last?

Jonathan Salem Baskin writes the Dim Bulb blog and is the author of Branding Only Works On Cattle.

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