From...

May 5, 1999
Web posted at: 1:12 p.m. EDT (1712 GMT)

by Paul Heltzel

(IDG) -- The hottest trend in PCs these days is the "free" PC, a new computer for as little as what you would pay for Internet access alone.

Depending on the vendor, the terms vary and, in some cases, carry a heavy catch.

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Some offers, like that from Free PC, require no up-front or monthly charge. The catch is they will subject you to targeted advertising while you use the system.

Others come with a variety of odd requirements. Hand Technologies, a recent entry, offers a Cyrix MII-333 PC, apparently at no cost. Look further, however, and you'll notice that the zero balance comes after a $75 mail-in rebate. In addition, you'll need to pay an up-front fee of $145 and pass a "competency" test. Furthermore, you'll need to sell a "minimum amount of product," such as two of the company's training programs.

Other services, such as Intersquid.com, Enchilada, and Gobi, offer new systems bundled with Internet access and require yearly contracts, with cancellation fees for early termination. For example, Gobi requires a three-year contract for a 333-MHz Intel Celeron-based PC, with an $699 cancellation fee for the first year, $499 for the second year, and $249 for the third. If you make it through the three year-contract, you'll get an upgraded computer.

If you run through the math, you can quickly see that the PCs aren't free at all. Just add up the setup fees, monthly charges, and other clauses appearing in small type. To be fair, Gobi and most of the other vendors that offer cell-phone-style contracts readily disclose that the PC isn't a free lunch, and they make their service charges and cancellation fees quite clear.

When it's a deal

These offers can have a certain appeal, at least to those of us already paying $20 a month for an Internet service provider, when you consider the substantial cost of buying a new system. Hey, Mindspring, where's my free computer?

WebTV users in particular, who sometimes slug along with network hiccups and limited features (read: no hard drive or monitor) may wonder why they should pay $19.95 a month, plus $99 for hardware, when that price could get them a computer to boot.

"For some of the vendors offering PCs at $20 a month, it offers a lot of material value compared to what you're paying an ISP already," says Paul Hughes, an analyst at the Yankee Group. "But you've got to have a good understanding of what the end result is."

Hughes cautions potential buyers to read the fine print, and to find out whether you must return the PC at the end of the contract. Most of the offers require commitments of between three and four years. Another concern: Are you at the whim of periodic price increases? You should check for price guarantees over the term of your contract.

"I would prefer to choose my own PC," says Greg Blatnik, a vice president of Zona Research. "I want to do my own homework and find the PC that best meets my requirements. I already have an Internet service I'm happy with. And I absolutely don't want to get barraged with advertising."

It may be too early to tell whether the companies selling PCs with monthly service fees will last as long as their contracts require. Such systems may, in fact, be good deals for those who no longer want their WebTV or have yet to get on the Net. Just make sure you know what you're getting at the end of your term. You could get nothing and a shipping charge. Then again, you might get the whole Enchilada.