A start-up called Enchilada will launch yet another free-PC plan tomorrow that will allow customers to get the combination platter of Internet access and a PC for a low monthly price.
Enchilada is the latest entrant into
the free, or subsidized, PC market. Technically, the PC isn't free. These
companies recover the cost of the box through long-term Internet access
contracts with the PC owner, lateral advertising deals, or-as in the case of Hand Technologies--agreements that obligate the
PC recipient to sell products and services via a multi-level marketing program
to other customers.
But although strings exist, these deals are expanding PC usage by
lowering the initial investment involved in getting wired. Many more of
these deals are expected this year.
And, if Enchilada is any indication, the initial investment is getting
lower all the time. Enchilada will offer a free PC complete with a 300-MHz
AMD K6-2 processor, Windows 98, a
15-inch monitor, and unlimited Internet access for $19.99 a month, or
roughly the price of standard Internet access. The company will also send
technicians to consumers' homes to set up their PCs.
The catch? Participants have to agree to a four-year contract for Internet
access, said a spokesman for the company, or pay $799 in advance for the
entire package. The company, which is a division of Simple Solution, also
charges $99 for shipping and handling. PC upgrades are permitted after two
Enchilada in many ways is aiming at the first-time user market, said a
spokesman. Along with providing free installation, the company is creating
its own help site, SOS
Enchilada, that will answer basic questions about navigating the Web,
purchasing products online, downloading plug-ins, and how to use chat sites.
"Our slogan should be 'We want to hold your hand,'" the spokesman said, who
then added that it would probably be too expensive. The company was founded
by former executives from the Garment district in New York.
The company's PCs are fairly complete, especially compared to some other
The Webzter Jr. from MicroWorkz,
for instance, does not come with a monitor or CD-ROM drive. The Webzter Jr.
sells for $299 but comes with a free year of unlimited Web access, which
effectively neutralizes the cost of the PC.
Other product bundles are also available. The "Enchilada Grande" package
includes a Lexmark color printer, an office suite package with word
processing, database, graphics, assorted games, and a four-year on-site
warranty for an additional
$9.99 per month over four years, or $1,199.
Enchilada's monthly fees are on the lower end of the scale for companies
following the "cell phone" business model of giving away the hardware with
a service contract. However, the four-year length of the obligation is
longer than similar companies that charge a monthly fee. Gobi, for example, charges $25.99 a month,
but only obligates customers to a three-year contract.
Gobi also permits customers to cancel the contract and pay for the
remainder of the PC. Enchilada currently follows a "no substitutions"
policy and does not as yet have an early termination program, according to
How this market will develop and which strategy will win has yet to be seen. What is certain is that the
free-PC phenomenon will endure. Intel
executives, among others, have said that numerous companies are
experimenting with free PC business models at present.
Intel, among other chip makers, is also trying to facilitate the process.
Intel for instance, is now working with some of these
free-PC companies, showing them processor road maps, providing them other technical information, and in general treating this as a new branch of the PC market.
"We're working with them on the cost models. Obviously, a free PC isn't
free," said Paul Otellini, general manager of the Intel Architecture
Business Group. "This is probably analogous to the kinds of discussions we
had when retail emerged."