The Age of the Discount

This year, for the first time, more than half of all households in the U.S. have a PC. Contractors now install copper wires and networking in new homes so that owners can put computers in each room or contact their microwave from work. TV set-top boxes are bringing the power of the Internet to the TV.

What is the impetus for this technological revolution? It is coming about because we are Americans. And we are the cheapest people on the planet.

Isn't that what the Internet is really all about? Getting a deal. The word "free" is like raw meat to Americans. Try to sell useful kitchen appliances to consumers for a fair price, and they will criticize the quality. But slap a corporate logo on a coffee cup, hand it out for free, and people will claw each other's eyes out to get one. Who cares if the food tastes like wood at Steak Barn? They have free refills.

The wide-ranging, open nature of the Internet has dovetailed perfectly with the urgent longing of every American to get something for nothing. Silicon Valley visionaries will claim that the electronic frontier exists because people are moving toward a new stage of enlightenment. Possibly true, but nearly everyone I talk to seems to want PCs now because they can get them for less than for what their neighbor paid.

This country was born, after all, out of an urge to avoid sales tax.

Besides, the core foundation of many of the fastest growing companies today is that their goods are free, or at least really, really cheap. Yahoo, a multibillion dollar company with a greater stock value that the vast majority of industrials, never collects a cent from the vast majority of its viewers.

A year ago, few had heard of a small PC company called Emachines. Meanwhile, the company's $399-and-up boxes have made it the third most popular machines at retail. And then there are companies such as Free-PC, or NetZero, which have risen to national prominence thorough giving away, respectively, free boxes and free Internet service, as long as one is willing to wade through an avalanche of spam. Does it work? Free-PC has a waiting list.

The ripple effects from "free" are enormous. Free PCs mean large contracts for chipmakers, electronics assemblers, and even makers of cardboard boxes. More machines also generally lead to paid-for faster ISP connections or impulse buying on the Net. Skeptical, inaugural users upgrade to expensive boxes.

The cell phone exists because of the same sort of bait-and-switch financing. These are billion dollar empires, and all because someone in Nebraska wanted to get online and ten percent off on the 30th anniversary edition of Beneath the Planet of the Apes.

What remains especially remarkable about the phenomenon is the lengths individuals will go for their deal. Every week we receive hundreds of e-mails from angry consumers complaining that they didn't get their cheap PC or that their free Internet service provider is slow.

The irony, of course, is that THESE PEOPLE ARE ALREADY CONNECTED. That's how they are sending their complaints. In other words, these companies don't appear to be shafting slow, less-sophisticated individuals toiling under the burden of poverty but someone who wants to bring the universe to the game room.

Europeans, especially older ones, are mystified by this. Why would you want something that you know won't work anyway? But at the same time, the average European fridge is about half the size of the U.S. version and can barely hold two 24-packs of diet soda, and there are no stores like the Price Club where you can get 48 cupcakes on a cardboard palette that taste terrible but are nonetheless a bargain. Europeans lack the elemental grossness for such affairs.

We are thinking big by being narrow-minded.

Michael Kanellos is a department editor at News.com. He got his watch at a trade-show booth.