Dell offers free Net access in Europe

Dell Europe said it would offer free Internet service under the DellNet name, becoming the first major PC vendor to do so in Europe.

The service is initially being offered in conjunction with software from British Telecom, with other European ISP networks in France and Germany slated to be offered next. Users in each country will get their own DellNet Web site, with localized information and news provided in conjunction with Excite@Home's search engine.

While the DellNet service will be preinstalled on Dell's Dimension PCs for the consumer and small business markets, the software is available for installation on any PC.

But even if Dell only gets new buyers of Dell PCs to use the service, the company stands to make a reasonable dent in the online service market. According to International Data Corporation, Dell's marketshare in Western Europe is slightly less than 10 percent, second only to Compaq.

Already in the United States, Internet usage is one of the primary drivers of PC sales. In European households, Internet usage is predicted to triple to 47 million users by 2003, according to Jupiter Communications.

In the United Kingdom, electronics retailer Dixon's started a mad rush to offer "free" access to the Internet with its Freeserve Internet service. Users of free services, including Dell's, still pay phone charges for each minute they are online. Dixon's became the top ISP in the United Kingdom over the more established America Online in a matter of months as a result.

Which raises a logical question: Will Dell do the same in the United States?

Not exactly. Because U.S. consumers are used to paying for their Internet service. One possible method Dell is considering is a move to the cell phone strategy where the cost of the PC is subsidized by selling a contract for Dell-branded Internet service, said Merrill Lynch analyst Steve Milunovich in a recent report. (See related story)

Michael Dell, chief executive of Dell Computer, has also hinted that the company is exploring the idea. In a recent conference call with financial analysts, the analogy he used was that of the cable-TV subscription, where users lease a cable TV box for a nominal fee and get charged for access to programs.

Another direct vendor, Gateway, has been bundling a year's worth of Internet service along with sales of its computers and offers its own branded service. A variety of smaller start-ups are offering PCs for free if buyers agree to pay for an Internet service contract that usually lasts three or four years.