Netbook mania set for large impact on mobile space

Over the past year wireless operators have begun populating their retail stores and Web sites with a new niche of devices, the netbook. These devices busted onto the scene last year offering dimensions, capabilities and prices somewhere between traditional laptop computers and smartphones.
The explosive uptake of these devices caught the attention of the wireless industry, which saw opportunity in embedding their wireless data service with netbooks at a subsidized price for consumers. However, that subsidized pricing is tied to a contract for data service that typically begin at $40 per month.
Forward Concepts recently noted that netbook users are placing a greater emphasis on pervasive Internet connectivity, which plays into the hands of carriers embedding such capabilities into their offerings. The research firm said it expects sales of netbooks embedded with wireless data capabilities to grow at a 124% compound annual growth rate reaching 34 million units sold per year by 2014. While that is still small compared to overall handset sales, it’s a significant number of devices that are capable of drawing significant resources from a carrier’s data network.
According to online analytics firm Compete TNS, consumer interest in netbooks being sold through carrier Web sites surged from non-existent at the beginning of this year to around 500,000 page views per month. The firm added that the same number of people viewed the Hewlett-Packard Co. Mini 1151NR netbook on Verizon Wireless’ site in August that also checked out HTC Corp.’ Touch Pro smartphone.
Drawing mobile players
The allure of the netbook segment recently claimed Nokia Corp., which this week said it had partnered with AT&T Mobility and big-box retailer Best Buy to begin offering its Booklet 3G for a subsidized price of $300. The move into the netbook space makes sense for Nokia as it looks to broaden its appeal, but the company’s efforts may take away from its effort to solidify its smartphone lineup, which the company said during its third-quarter conference call this week was losing share in the marketplace.
For carriers, the netbook craze could spell a financial windfall as those looking at the subsidized price being offered by wireless operators can produce a nice bump in data revenues. This is especially important as voice revenues continue to find ways to fall. Carriers are also requiring customers acquiring new data-hungry smartphones to sign-up for specific data packages that are priced at a premium compared with packages targeting traditional feature phones. For netbook users there is also the side benefit of overage possibilities that can come should they surpass a carrier’s 5 gigabyte data cap associated with their wireless broadband packages.
There are less expensive ways for consumers to tap into the 3G-enabled netbook space. Leap Wireless International Inc. offers 5 GB of data transmission through its network for two-thirds the price of the nationwide operators and recently unveiled a new offering that packages 10 GB of usage for $50 per month. Leap’s service also does not require a contract, an option that could appeal to those looking for more casual usage of wireless broadband services.
Some are also looking to completely do away with usage caps. Sprint Nextel Corp. allows users unlimited data usage when accessing the Internet from the carrier’s “4G” service that piggybacks on Clearwire Corp.’s mobile WiMAX network. Sprint Nextel bundles the unlimited 4G access for a $10 premium on top of its capped 3G offering.
Bump(s) in the road
But, not all is gold when it comes to netbooks and wireless carriers. Josh Holbrook, director of enterprise research at Yankee Group, recently noted in a column for RCR Wireless News that Intel Corp. Chief Marketing Officer Sean Maloney said retailers were seeing return rates in the 30% range for netbooks as consumers began to realize the limitation of such devices. This sort of return rate would indicate around one-third of consumers were not happy with their device and if those consumers were tied to a 2-year contract through a carrier that could lead to a substantial group of disappointed customers.
There is also concern about netbook usage further hampering already increasingly deluged wireless networks. Speakers at the recent 4G World 2009 event in Chicago noted that despite all the bad press AT&T Mobility’s 3G network has generated the device most often linked to the network’s shortcomings, Apple Inc.’s iPhone, draws on average less than 1 GB of data transmission per month per device. Netbooks, on the other hand, have significantly greater Web browsing capabilities and could easily bump up against the 5 GB cap set by carriers. If enough of these devices begin streaming data-heavy content through constricted 3G pipes the network impact could be tough to manage.
Yankee Group’s Holbrook also pointed out that netbooks’ computing limitations, based on their slower processor speeds and minimal memory, could bleed into consumers’ perception of a carrier’s network quality. A certain application that is being hampered by a device shortcoming could be seen by some as a network issue.
“The solution to this issue isn’t to stop offering free netbooks, but rather work overtime to educate consumers about the limitations and practical uses for netbooks,” Holbrook suggested.