How Low Can PC Prices Go? $0 - free computers are contingent on using services - Brief Article

Kiplinger's Personal Finance Magazine, August, 1999 by Ronaleen R. Roha

But what do you really have to pay for a "free" computer?

The free fall in personal-computer prices had to stop somewhere. And it has--at $0. Zip. Nada. Well, sorta. Just as there are no free lunches, there are no truly free PCs, either. But some deals are pretty appetizing.

James Lemons of Helotes, Tex., is happy he bit. The 42-year-old respiratory care practitioner got his first computer this spring courtesy of InterSquid (www.intersquid.com). When he heard about InterSquid's PC giveaway, Lemons "decided to give it a whirl. I had nothing to lose." He now surfs the Web like a pro.

To get his free machine, Lemons had to sign a 30-month contract for pricey, $29.99-per-month unlimited Internet access. He also paid $60 for shipping and $40 for a mandatory credit check, bringing his out-of-pocket costs over two and a half years to about $1,000. Assuming he could get equivalent Web access for just $20 a month, Lemons will pay, in effect, about $400 for the computer over 30 months. Not bad for a 333-megahertz Intel Celeron processor, 32 megabytes of RAM, a 4.3-gigabyte hard drive, 15-inch color monitor, a 40X-speed CD-ROM drive and 3.5-inch floppy drive, 56K modem, keyboard, mouse, speakers, microphone, Windows 98 and more--plus a three-year warranty. At the end of his contract, Lemons keeps the computer.

InterSquid's deal, like those of a number of players in the free-PC marketplace, mimics the way the wireless-telephone industry gives away handsets. You can use the computer for anything you want, but these companies hope to hatch a whole new flock of avid Internet shoppers through the easy access they provide to their advertisers' Web sites. Commissions from e-commerce and perks from deals with advertisers are where the real money is.

WHAT YOU GET. Most giveaways are solidly middle-of-the-road-speed machines, although a few, such as the one from PC Free, approach state-of-the-art. Don't expect brand names. Computers are more likely to be from companies such as Ingram Micro, Nimble and Solectron. But some of the deals, like InterSquid's, could be just right for you if you're looking for your first computer, or you're adding number two or number three to your home.

Expect to be bombarded by offers in the future. Best Buy, for example, is putting the finishing touches on a PC giveaway plan to be rolled out soon. Here's a look at some of the best deals being offered as we went to press. Unless otherwise noted, you'll sign up for a 36-month contract and get a PC with a 333MHz Intel Celeron processor, 15-inch color monitor, 56K modem, CD-ROM and floppy drives, speakers, keyboard, mouse, Windows 98 and some other software (perhaps Corel WordPerfect Suite), and a one-year warranty.

* DirectWeb (www.directweb.com; 64MB RAM, 6.4GB hard drive; $19.95 per month for basic service plus $65 shipping and a refundable $150 deposit). You get back the deposit if you return the computer at the end of the contract, or you can keep the machine. The net cost of the computer--that is, the total amount you pay minus what you would pay for Internet service at $19.95 per month--if you keep it: $215.

* Gobi (www.gobi.com; 32MB of RAM, 3.2GB hard drive; $25.99 per month plus a $29.99 start-up fee and $45 for shipping). If you cancel early, there is a penalty based on the term remaining but you keep the computer. At the end of the contract you can keep the computer for a small fee, expected to be less than $50. Net cost if you keep it and pay the $50: $242.

* PC Free (www.pcfreecomputers .com; 450MHz Intel Pentium III processor, 64MB RAM, 8.4GB hard drive, DVD-ROM drive, 17-inch color monitor and color printer; $39.99 per month, no contract required). If you subtract the $20 a month that Web access might otherwise cost, you're basically paying $20 a month to rent a computer and printer. There's no contract to sign and you can terminate the deal--and return the equipment--at any time.

The deals from DirectWeb, Inter-Squid and PC Free include one year of free in-home repair.

A HIGHER PRICE? Not all so-called free-PC deals involve buying Internet access. A company aptly named Free-PC (www.free-pc.com)initially gave away 10,000 Compaq Presario computers with free Internet service to people who said they wouldn't mind ads covering more than 30% of the monitor's screen all the time--not just while they were surfing the Internet. (Think of it as a TV show with commercials running all the time.)

The company will hand out more PCs, and so far more than one million potential recipients have applied online, a process that includes answering a slew of personal questions about their household income, the birth dates and gender of their children, the magazines they read and hobbies they enjoy.