When is a free laptop not actually free? When it comes with a dongle!
By Chris Green in Editorial
Posted in Mobile Data, 3G, Broadband, Laptops, Mobile Phones on
The UK mobile phone-buying public have become used to getting their handsets for ‘free’ or at least heavily discounted over the SIM-free ticket price.
Of course, there is no such thing as free, but rather just deferred cost or hire purchase without the financial regulation. That Nokia N95 doesn’t really cost £29, but rather the £300 that has been subsidised off the top line will be recouped from you (plus a healthy profit) over the life of your 18 months £50-a-month airtime contract.
However, a USB 3G dongle is not an expensive bit of kit. The pay-as-you-go (PAYG) price on most networks is £49.99 inc VAT, and that price includes a profit margin. More money will be made from PAYG mobile data use, but as this revenue will be unpredictable - there is no safety net of a contract and guaranteed minimum recurring payments – the network needs to ensure it is not left out of pocket by selling you a discounted dongle that is subsequently lost, left in a drawer never to be used, or unlocked and used on another network.
Dongle contracts are a different matter. For example, I signed up last year to a two-year contract at £15 a month for my 3G USB dongle and service from 3. In return for signing my life away, I got the dongle for free. Given the cost of the dongle if bought outright, that isn’t much of a subsidy, even on a £15 data plan. If I’d gone for the higher £25 plan (or if I signed up now to 3’s new £30 plan) that’s even less of a subsidy and an even bigger profit margin for the network. However, I’m not bitter; this is the price you pay for being an early adopter. I’m also very impressed with the quality of the data service from 3. That said, I would much rather have the new Huawei E169G USB stick instead of the E220 ‘lozenge’ dongle (pictured) I have now.
Given that all the networks are now offering 3G dongles (O2 has finally joined the party), how do you differentiate your product from the competition?
The answer is simple – bundle your dongle with a ‘free’ laptop.
Several retailers in the UK have followed the lead of Carphone Warehouse by bundling laptops with 3G data dongles. Not only has this helped lift sales of laptops even further in the UK, but it hasn’t done the sale of data dongles much harm either. Carphone has succeeded in bundling laptops with fixed line broadband as well as cheap and nasty phones as a way of clinching a sale. What some thought would be a gimmick has become a solid sales strategy that is being mirrored by the rest of the electronics retail business, not just traditional mobile phone retailers.
People like this model – they get to leave the store with a shiny new laptop with no money down, they get internet access anywhere, and because the monthly bill is for the mobile data service (and often priced a little higher than if you’s just signed up for the dongle alone), it doesn’t feel like a hire purchase agreement. In fact, if feels like the laptop was in fact free.
This is no different to the N95 example at the beginning of this post, it just substitutes the expensive phone with a computer of equal or lesser value. You are in fact still paying for it the same way as the actual cost and more is averaged out across the life of your airtime contract.
Consumers and small business customers are about to be hit by a barrage of new deals offering a laptop bundled with a dongle. Networks such as 3 and Orange are set to offer these deals directly via their own stores, rather than deferring the risk to retailers such as Carphone, which fund the laptop out of the commission they receive for selling the dongle. If the customer is a dud, that commission can be reclaimed either in part or in full.
And the laptops on offer are not shabby either, with 3 preparing to offer known HP machines rather than a cheap and nasty unbadged unit.
The popularity of 3G data dongles is not only transforming the way we access the net in the field, but it is also having a lasting effect on the retail model for computers.
Rated: 100% (2 votes)
Loading ...Comment by Phil - July 21, 2008 on 6:37 pm
I’ve played with a couple of these services and I think they’re great as a back up or mobile option, but not up to broadband replacement (yet).
The next development, I reckon, will be cheapy laptops like the much vaunted Eee PC, with built in 3G, rather than having a dongle. Then watch them disappear like the proverbial hot cakes…
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