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Fry's may launch ISP as part of new Net strategy

The PC retailing giant quietly is laying the groundwork for an Internet strategy that includes providing Net access to its customers.

Fry's Electronics, the PC retailing giant, quietly is laying the groundwork for an Internet strategy that includes providing Net access to its customers, according to sources.

Sources told CNET News.com that the PC retailer is planning an Internet service provider that it wants to make "as good as its competition," including America Online, Earthlink and CompuServe, among others. It is asking some San Francisco Bay area rank-and-file workers to test the product in-house and provide feedback. Fry's calls the ISP the "first phase" of its Internet strategy.

In addition, a Fry's Web site is under construction that would offer an "Internet store," as well as provide information about the retailer's history and maps to the nearest Fry's locations, sources said.

They suggested, however, that Fry's had less interest--at least for now--in opening a full-fledged e-commerce site, which could cannibalize sales at its retail outlets.

A message board dedicated to consumer complaints about Fry's also mentioned the plans. "Information from a reputable source inside Fry's leads to an interesting new twist in the Fry's business model--dial-up Internet service," the posting said.

Fry's is considering high-speed Net access as well, the sources said. "They are talking to (our) senior management about cable modems, and high broadband and DSL modems," said a salesperson at Best Data, a cable-modem producer that has held discussions with Fry's. "They are ready to bring in DSL."

Sources at Pacific Bell also disclosed that they have held talks with Fry's about providing DSL (digital subscriber line) service.

PC retailers such as Circuit City, Kmart and Best Buy are providing consumers with Net access to help boost sales of their computers, using ISPs such as Microsoft Network and AOL. The companies, facing stiff competition, want to provide a ready-made package to consumers.

"Fry's has quite extensive Web strategies that could include anything that you could think about," said Arthur Dressel, Fry's ISP manager. "We're working on things that would be profitable and help the company."

Dressel declined to discuss specifics, however. "I can't confirm or deny that," he said of the ISP plans.

Fry's, a closely held private company, is based in the heart of Silicon Valley. It has 17 stores in California, Arizona, Oregon and Texas.

Fry's stores are legendary in the computer retailing business. They carry a wide selection (some 50,000 items in each store) and are decorated with lavish displays, such as a Mayan temple, a crashed space ship or a Wild West saloon.

The company was founded in 1985 in Sunnyvale, Calif., by the three Fry brothers, John, Randy and Dave, as well as Kathy Kolder.

Forbes last year listed Fry's as one of the 150 largest privately held companies, with estimated annual sales of $1.3 billion.

Last December, AOL and Yahoo struck cross-marketing agreements with retailers Circuit City and Kmart, respectively, hoping to tap non-Internet-savvy consumers. A similar deal was inked between AOL and Wal-Mart in the same month.

News.com's Troy Wolverton and Corey Grice contributed to this report.