Jim Barksdale has a dream. Or maybe it's just deja vu. The president and CEO of Netscape - a former cell-phone guru - envisions a future for the network computer and set-top box industry that sounds hauntingly similar to the current mobile-phone marketing hype.
Yep, we're talking free hardware. Barksdale told a crowd of techies last week in Albany, New York, that "the home user buying a personal computer will be a thing of the past," the Albany Times Union reported.
What then will be the thing of the future? Apparently players in the low-cost consumer-computer market will be giving their CPUs away for free, subsidizing the boxes via ad revenues, online purchases, and subscription services, Barksdale said in a keynote address at the Government Technology conference.
Barksdale is no stranger to such marketing concepts. As chief of McCaw Cellular until AT&T Wireless bought that company, Barksdale helped pioneer the cellular-phone boom in the consumer market, through contract-subsidized handset giveaways and near-giveaways.
Barksdale foresees a similar boom in NCs. "In various parts of the country, you will be definitely seeing trials within a year - within a year from now - of these kind of distribution models for appliances, network computers, and personal computers," Barksdale said.
But spokeswoman Chris Holten denied that Netscape is pursuing the future that Barksdale is contemplating. Netscape, she pointed out, is not in the hardware business.
Still, if Barksdale's inkling is correct, then that's precisely the business in which Netscape might wish to be. Iain Gillott, an analyst who specializes in wireless and broadband technology at International Data Corporation, said those companies that have profited significantly in the handset handouts are, perhaps surprisingly, the makers of the phones. "If you're the carrier, you're on a slippery slope. If you're the equipment manufacturer, the market has been enormously stimulated," he said.
Of course, such stimulation has its dangers, at least in the cell-phone world. "The perceived value of the handset to the end user is zero," explained Gillott. "A lot of people equate cell phones with cordless phones," not realizing that most cell phones cost hundreds of dollars to manufacture.
When this happens, Gillott says, "You start to move toward a commodification of the equipment, which is not what you want to do ... It encourages non-use. The perceived value for that end user for the device is very, very low, and that's not what you want."
Tim Bajarin, president of the high-tech consulting firm Creative Strategies Inc., believes that, despite the dangers of price wars and devalued product perception, the NC market is indeed being driven in the direction envisioned by Barksdale. "I tend to think he's correct - a lot of the applications that you use an NC for tend to be driven by a service model," he said, pointing to fees paid to rent a computer terminal or get Internet service.
But Bajarin takes issue with Barksdale's one-year time frame for preliminary implementation of such strategies. "I don't think it really becomes a significant market issue until at least 1999. You've got to have bigger pipes, and applications, and that stuff's probably still a year off just in the development sense," he argued.
Venture capitalist Tim Draper, who tries to predict the future with companies Draper Fisher Jurvetson funds, says that free hardware as a new business model for the NC market is not outlandish, but it does have its dangers.
"A lot of the Net has been created by giving something away," he pointed out. "Netscape has done that, cable companies do it - and it's been a tremendous success for them." One trouble with the giveaway idea, though, is that consumers think of computers like they think of cars - they always want the latest and greatest model of tech toy.
"People won't be satisfied with their service unless the providers keep upgrading the boxes," Draper explained, but "if the service providers have to keep installing new hardware, then it would be hard for them to make money."
Just how such a giveaway or subsidized system would work is certainly not mapped out. But if Barksdale has an idea up his sleeve that would let Netscape hand out the hardware so that the company could sell more software, consumers would surely be all ears.
