Wireless Carriers: Your New PC Retailer?

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Mobile-phone service providers and their marketing muscle could also help their computer making partners grab market share quickly. T-Mobile, for instance, has sold 60,000 netbooks since making them available in September. "You could get quick market share, provided you work well with a telco provider," says Shim. Such companies as Acer, Dell, Samsung, Hewlett-Packard (HPQ), and LG—which have announced wins with AT&T, T-Mobile, and Vodafone—could end up climbing the market-share charts.

Downward Spiral of Prices and Margins

The deals with carriers could also make it easier later for PC makers to market other electronics, such as smartphones and mobile Internet devices (MIDs, which are slightly smaller than netbooks) through the carriers. Already, Acer and several other PC makers have announced smartphone models, and Dell is rumored to have developed one. "They'll establish some brand presence and then slowly introduce a smartphone [in the following 12 to 18 months]," says wireless consultant Chetan Sharma. "This gives them expertise in the ecosystem."

By the same token, faster sales of netbooks could mean diminished demand for more expensive computers. "The [PC] industry overall gets pulled into this downward spiral of [lower average selling prices] and margins," says Roger Kay, founder of consultant Endpoint Technologies Associates.

And as netbooks take off, what happens to demand for smartphones made by such vendors as Nokia (NOK) and Research In Motion (RIMM)? Some consumers may opt for a netbook—or its smaller cousin, the MID—instead of high-end smartphones that cost about as much. A netbook offers greater battery time of 10 to 16 hours, while a phone typically conks out after five. MID screens are larger and more conducive to watching video. The category could receive a boost if, as expected, iPhone maker Apple (AAPL) releases a MID-like device with video capabilities.

Why Not Multiple Mobile Devices?

Carriers also may wish to steer consumers away from smartphones and toward netbooks or MIDs. Today a smartphone brings more profit to carriers because it uses data as well as voice services; a netbook merely gobbles data. But this might change: Users of netbooks or MIDs may be willing to pay more for access to additional bandwidth so they can surf the Web and watch movies online. T-Mobile believes consumers may also pay for such extra services as a subscription to Microsoft (MSFT) Office and Norton AntiVirus software or to virtual storage services. Some users may buy display insurance and additional tech support from carriers.

Handset vendors such as HTC don't foresee danger. "We see netbooks as being a new and emerging segment that's expanding the pie," says Steven Seto, executive director of marketing for HTC North America. After all, people buy multiple TVs for their homes. So they may buy multiple mobile devices. "It's the inspiration for what one day might happen in our industry," he says.

Carrier-sold netbooks are bad news for traditional electronics retailers such as Best Buy (BBY) and Wal-Mart (WMT). "They are undercutting Best Buy by several hundred dollars [in up-front costs]," says John Spooner, an analyst with Technology Business Research. "Companies like Best Buy and Wal-Mart are under some pressure because now they have a competitor." Best Buy did not respond to a request for comment.

Cable companies such as Comcast (CMCSA), which did not return a request for comment, could suffer as well. Instead of hooking up to fixed broadband from a cable company, some consumers may opt for wireless or bundled wireless-home offerings from a telecom provider instead. What's more, some 5 million to 10 million Americans already connect wireless notebooks to the TV and stream movies from Hulu.com and video from Google's (GOOG) YouTube, says Phil Leigh, president of consultant Inside Digital Media. "The cable TV operators will discover their audience is using mobile video and will, over time, begin to cancel their cable subscriptions," he says. "Beyond a shadow of a doubt, it's going to have big impact."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.