AT&T Talks Subsidized Netbooks, More-Flexible 3G Pricing, and More-Connected Gadgets

$1,539 for a netbook?! That’s  the thought that went through my head shortly after AT&T announced late last year that it would be offering the 8.9-inch Acer Aspire One with embedded 3G for $99—requiring a two-year, $60 per month contract, through RadioShack.

Actually, according to AT&T, the sales of this subsidized Aspire One are exceeding its expectations (though its unclear what those were). The carrier argues that buyers of that netbook think of it more as a cell phone than a PC and are willing to spend more to have anytime, anywhere mobile broadband.

Still, there’s no question that AT&T would be able to attract many more subsidized netbook buyers if it offered a wider array of 3G pricing options. Glenn Lurie, president of emerging devices and resale for AT&T Mobility and consumer markets, talked to us about this topic and more. Here are the highlights:

• Netbooks need to offer even longer battery life, as well as instant-on access across the board, to be more compelling wireless devices.
• We’ll likely see at least one smart phone maker jump into the netbook game. (Who knows, maybe HTC will produce a better device than the Shift next time around.)
• AT&T is looking at all sorts of payment options for 3G data, including prepaid, day passes, capped plans (similar to voice minute plans), and even family plans for households with multiple devices.
• The carrier envisions a not-too-distant future in which it will sell not only netbooks in its stores but all sorts of connected gadgets, including e-books and GPS navigators.

How does AT&T view netbooks right now?
Netbooks are really interesting right now, but the real exciting thing about these devices is how they will be used a year from now. They need to have longer battery life, where you can use it for most of the day. And they have to allow for instant-on; they can’t have a five-minute boot up that you have today on a big notebook. They have to have intelligent connection managers where customers don’t have to hunt for Wi-Fi. We are excited to get all these devices on our network, and from our perspective, the growth in this area is fantastic.

You mentioned instant-on technologies and customers being able to get online right away. Is there a particular solution, like Splashtop or Hyperspace, that AT&T is backing?
We are merely just saying that customers want to get to their e-mail and to the Web right away. I think there are a lot of people and OEMs looking at that right now.

Is there a certain netbook manufacturer that AT&T feels is doing the best job?
I can’t say. We are seeing a lot more companies dive into the netbook space that don’t even build computers. There are companies that build smart phones that think they can build computers, and you are also seeing smart phone companies trying to build computers. It going to create more divergent types of devices. We will support all of them.

Can you tell us how good the sales have been for the subsidized $99 Acer Aspire One being offered at Radioshack?
Anecdotally we are very pleased with the initial results. We see how many are sold and activated and the usage with them. The numbers have exceeded our expectations.

The reason people are buying netbooks to begin with is because they are low-cost. Isn’t adding a $60 monthly data fee on top of that a turn-off for prospective buyers, especially now?
The reason people are buying these is because of an overall value proposition, not the cost of the computer or the cost of service. It is the same model we have had in the cell phone business for years. A customer walks in and buys a smart phone and they are going to buy a plan; they are looking for the right device and AT&T is going to subsidize the device.

But you are still talking about twice the monthly investment of a smart phone. What other sorts of other pricing plans might AT&T be looking at to make subsidized netbooks more palatable for consumers?
First of all, today with the current pricing models, customers are willing to pay, because we are adding customers at record numbers. The people are seeing the value proposition, whether they buy an embedded solution from Dell or Acer or a PC dongle. We are breaking monthly records even in a down economy because customers see the value proposition and are willing to invest, because they want to be connected anytime, anywhere.

Your point is valid is that we have to have other flexible choices for the customer. We have to be able to give customers a choice like we have in the voice business. You might want to do a prepaid offering where you buy a card, you might want to do a day pass like you have seen in the Wi-Fi business. I think we may have to go there, too. You may want to see a capped plan that gives you something similar to your minute plan. All these things may come to fruition as the market matures. My group is focused on looking at these options and testing them.

Acer mentioned to us the possibility of giving customers an allotment of hours per month to use mobile broadband, where you would have a countdown timer embedded in the connection manager utility. Does this seem like something that could work for AT&T?
A connection manager’s job is to make sure you are on the right network, not counting how much you use. The manager determines whether you are on Wi-Fi or on a 3G network. We love Wi-Fi, and that is why we have over 20,000 hotspots and 15 million customers with our broadband service in the home. For us the connection manager makes sure the customer is on the best network for them and for us at that particular time. The cost structure for us is good and we deliver effective cost rate plans because of the less usage on the 3G network.

Right now the customer could do a lot in an hour and push a lot of megabytes. You could do a ton in an hour or nothing. For us it is really about the actual data that gets transferred over the network.

AT&T has done a good job spreading the message about mobile broadband when it comes to connection cards, but are there any plans to make a similar marketing push for embedded netbooks?
I can’t speak to direct commercials or marketing efforts, but that is my whole job. The reason you haven’t seen it yet is because there aren’t that many of them being offered yet. AT&T sees this as a whole new business for us. This is going to be, without question, an area where we are going to grow.

Will people be able to buy a netbook in an AT&T store at some point?
Yes, at some point we will carry them and many types of devices in our stores. I see us including netbooks, MIDs, e-books, portable navigation, and all types of connected devices. I also see these devices being in the traditional big-box retailers and their Web sites.

Will AT&T offer a plan that allows customers to share a mobile broadband subscription among different devices?
We are looking at the whole customer experience, and we are looking heavily at the situation where the customer has five devices that are connected. We aren’t there yet, but like when the family plan was born, we will have to evolve to make sure that we give our customers a fair value. Is there potential for a bucket of bits and bytes that multiple SIMs could use? We do see the opportunity.