AT&T says subsidy model good for business

AT&T confirmed that it is subsidizing the cost of netbooks to entice more customers to sign up for two-year service contracts with the carrier. With the subsidies, consumers can buy netbooks from Acer and Dell for about $99 but they are then charged about $60 per month for AT&T's data services.

In fact, Glenn Lurie, AT&T's president of emerging devices, says that not only is the company willing to subsidize netbooks, it will also take this strategy to other types of hardware such as portable video game devices and digital cameras. "The economics for us is terrific. We're willing to invest to get a customer," Lurie said in an interview with Investor Business Daily. Lurie will be talking about AT&T's embedded device strategy during FierceMarkets' Path to 4G event April 1 at CTIA Wireless 2009 in Las Vegas.  Click here to see the agenda.

The subsidy model is a long-time tradition in the wireless industry. For years operators have subsidized wireless handsets in return for a two-year service contract from consumers. However, some consumers have balked at this practice, particularly when they want to walk away from their service contract before the two-year deal has ended. The subsidy model has been particularly successful for AT&T, which subsidized the popular iPhone 3G, bringing the cost of the iPhone down to $199 for customers who signed a two-year contract.

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