ATT will subsidize netbook purchases

AT&T hopes to have the same discount-based sales success with netbooks as it did with Apple's iPhone. By forging marketing alliances with makers of the compact low-cost laptops, it hopes to expand its wireless customer base. With AT&T rebates, consumers can buy netbooks from Acer and Dell for $99 (about a third of the normal retail price), and AT&T is talking with other computer makers.

AT&T boosted demand for the iPhone by providing subsidies to Apple that lowered the device's retail cost to $199. AT&T gained by signing iPhone customers to two-year service contracts. AT&T charges iPhone users $30 a month for data service and garners $40 to $100 for calling plans.

While subsidies cost AT&T in the short term, it gains more high-spending consumers paying for its services. It wants use that strategy with other hardware, starting with the very popular netbooks. AT&T says it will expand its subsidy program to cameras, portable video game machines, GPS devices -- anything that uses lots of wireless data.

"The economics for us are terrific. We're willing to invest to get a customer," said AT&T's Glenn Lurie. "We're very comfortable with the margins we're going to receive on these netbooks, in the deals we're talking about."

The netbooks are equipped with built-in chips for wireless Internet access. AT&T charges netbook users $60 a month for data services, the same as it charges customers who use larger portable computers.

In Germany, wireless service provider T-Mobile began subsidizing netbook sales in September. AT&T's main US rival, Verizon Wireless, offers a $200 rebate for Sony's high-end Vaio Pocket netbook and also offers $100 rebates for some laptop PCs.

Wireless subscriber growth has slowed for AT&T, Verizon and other wireless firms. Also, AT&T is signing up fewer customers for DSL service at homes, another reason to invest in wireless broadband. AT&T spent billions of dollars upgrading its wireless phone network to 3G technology. In December, AT&T bought Wayport for $275 million. Wayport manages 20,000 Wi-Fi wireless hot spots nationwide. (info from Investor's Business Daily)