Much ado has been made about the free-PC movement, which promises, with Hoover-like grandiosity, to put a computer in every home at bargain-basement prices. Since February, more than a dozen deals have been announced — from national chains like Circuit City and unknowns like Enchilada — that offer up white-box or brand-name computers for nominal fees, or free, in exchange for a subscription to an Internet access service. More than 1 million people have already signed up for computers from Free-PC, 250,000 went for a FreeMac — and that’s just the beginning. The popularity of free PCs is galvanizing the computer industry to ponder a near future when computers could literally be as ubiquitous as household appliances.
Chasing this new vision, some computer manufacturers are even redesigning their products to look more like appliances — building stripped-down boxes with button interfaces and one-click access to rudimentary software, like e-mail or calendar programs. The operating system behind those buttons, increasingly, is not Windows, but Be, Linux or Amiga — alternative operating systems which are known for their simplicity and stability, and are often cheaper than Windows. The “free” (or, to be more honest, “real cheap”) PC and computer-appliance market may just give these alternative operating systems a chance to cut into Windows’ dominance of the desktop. The first of the free PCs to use alternative operating systems — the PIA, the iToaster and the Be iDot — will become available this month.
“I do think that the emergence of the appliance market changes the market for operating systems,” explains Frank Boosman, vice president of development for Be Inc. “If you have a variety of vendors all over the world building all sorts of devices targeted at all sorts of uses, it’s reasonable to expect that different operating systems will have an opportunity on those devices.”
Remember when the computer industry, just a year or two ago, was crowing about breaking the $1,000 price barrier? Today, they are talking about the sub-$600 PC market; according to various analyst reports, these low-end computers already make up 11 percent to 21 percent of the market, and are growing fast. Other reports rank eMachines, the inexpensive PC company whose computers start at $399 and top out at $799, as the fourth-largest vendor of PCs in retail space.
This is the market that the “free PC” companies are stepping into, believing that if they take those prices even lower — perhaps to the point of “free” — that they can woo the final 50 percent of American households that don’t yet possess a computer. Of course, there is no such thing as a free lunch — manufacturers expect to recover the cost of the PCs, and then some, through other fees. Typically, free PC users commit to a three-year subscription to CompuServe, Prodigy, DirectWeb, EarthLink or one of a host of other ISPs that hope to lock consumers in to 1999 prices. Or, in the case of Free-PC, consumers agree to see ads on the computer desktop and provide market research data in return for a computer. Other companies have settled for selling the computers for $199 to $399; not “free” exactly, but less than half as much as a low-end retail computer.
Forget your preconceived notions about the purpose of PCs and Windows; think computer as household accessory, the digital equivalent of a telephone or Cuisinart — hence, cutesy names like the iToaster and the Personal Internet Appliance, or PIA, (the PIA’s marketing materials include the catch phrase “Blender! Toaster! PIA? Yes!”).
The concept, according to the evangelists, is that most low-end consumers will use their PCs only for Web access, word processing, and e-mail. Instead of owning an expensive PC that includes everything but the kitchen sink, they say, you’ll eventually own a variety of cheaper “appliances” that do one or two things well. Imagine a computer in every room, serving a specific function — sports data by the television, kid’s games in the playroom — each including basic Internet tools, and all for a price low enough that you can afford multiple machines.
“We don’t see supplanting the PC, but in addition to the PC in your study, you may well have a device in your kitchen that’s optimized for doing the things you want to do in your kitchen, for example,” says Boosman. “We think there are opportunities to build a whole variety of those kinds of devices, whether for kitchens and cooking or sports or news or entertainment or stock trading or what have you. We think that there’s an opportunity there for us.”
Take the iToaster, a new computer about to ship from Microworkz. Based on the BeOS, the black iToaster is a stripped-down device with a proprietary interface that consists of a number of square buttons across the screen. There are buttons not just for word processing, calendars and e-mail, but for music, auctions, shopping, weather, news and stocks. It’s more utilitarian than a WebTV, but not as expandable as a PC; the cost is $199, or “free” for those who sign up for two years of Internet access from AT&T at $19.95 a month. But there is no way to load new software onto the machine or even upgrade what’s there.
The idea, says Microworkz CEO Rick Latman, is that the iToaster will offer simple, one-button functionality and the basics of family computing — and no more. “To be successful in the Internet appliance market you must make it easy,” he explains, pointing out that installing new features is too daunting for many newbies anyway. “You don’t need a full PC to do what most people do with their computers.”
The concept of the iToaster is quite similar to another product shipping this month — Ebiz’s Personal Internet Appliance. The PIA is a little gray-and-silver box, whose guts are based on the Linux operating system. Like the iToaster, the proprietary PIA desktop features an array of one-click buttons for e-mail, games, Web browsing and word processing; users don’t even have to know that Linux is working on the back end. The PIA will cost $199, or $99 if you sign up for a year’s worth of Internet service with Prodigy.
In addition to the Be and Linux operating systems appearing on cheap boxes, prepare to witness the revival of the Amiga operating system as PC maker Gateway quietly slips into the appliance market. Using patents it bought from Amiga, the classic computing system that has all but disappeared from the market, Gateway plans to release a series of “appliance products” early next year. According to the Wall Street Journal, the new Amiga line from Gateway will consist of a series of low-cost computers — not merely desktop PCs but everything from game machines to portable music players to handheld devices, which will all link to the Internet and each other. A new Amiga operating system is supposed to be released this week.
Amiga executives declined to comment for this story, but unit president James Collas last week told the Journal that “there’s a new computer revolution on the horizon that has to do with making computers a natural part of everyday life,” bringing “the information age to the common person.”
Even the MacOS is being given a shot at the Free PC market — a start-up called FreeMac recently emerged to announce that it would give away a million iMacs in exchange for signing up for three years of service from an as-yet-unnamed ISP. A quarter of a million people responded within 24 hours.
Why are discount computer manufacturers choosing alternative operating systems, rather than sticking to tried and true Windows? One reason is expense: Windows costs $85 to license for each computer, far pricier than the free Linux. (Be would not reveal the cost of its operating system.) Another is differentiation — a non-Windows machine can give the discount computers a unique look and feel that may draw attention in a sea of near-identical Windows PCs. As Be’s Boosman puts it, “that may be the most fundamental thing we offer [computer manufacturers] — we allow them to stand out.”
It also has a bit to do with evangelistic idealism. “We are continuing the Linux community’s desire and vision to bring Linux to worldwide distribution, into the mainstream. That was an initiative of why we use Linux as an operating system,” says Jeffrey Rassas, CEO of Ebiz, before rattling off the advantages of a Linux operating system. “It makes sense — it’s open source, stable, requires less hardware; you can use components that are off the shelf to put together a basic PC. It’s not proprietary — it’s fully upgradable.” However, Ebiz and Microworkz also market cheap PCs running Windows.
Be, in turn, is finding that its 8-year-old operating system, typically used by high-end aficionados who already own multiple computers, is being tested as a low-end consumer product because of its reputation as a solid performer. iDot, for example, is putting a $449 Be-based computer on the market (a free-with-ISP deal is in the works), because, as iDot online evangelist Tom Beardmore puts it, “it’s a screamer.”
Beardmore contrasts Be’s speed and simplicity with the difficulties of Windows: “I would not want to give my mother a Windows-based computer as a first computer. She doesn’t know how to install drivers, she doesn’t know what a CD-ROM is. I’d rather give her something that was pretty bulletproof, like this Be operating system where everything is fully installed — even if you crash an application the computer continues to run.”
The free PC tribes also preach an idealism about reaching out to the huddled masses, the common man, those who might not be able to afford a pricey Windows PC. The rhetoric of the Free PC movement is straight out of an equal opportunities handbook; just take the Microworkz slogan, “Everybody deserves a computer.” Many purveyors of these machines believe that they will be reaching mostly newbies, but say they have also seen interest from institutions, universities and libraries.
“I saw an opportunity to empower the people on the planet who don’t have the readily accessible income to dedicate thousands of dollars to a system and make a contribution to this emerging information economy,” says John Wiess, CIO of Ebiz. “There’s a philosophical bent there, some community involvement on my end, that will help make the world a better place — I hope.”
Despite the optimism of the computer manufacturers and their operating-system partners, there are plenty that pooh-pooh the notion that the free PC gives Linux or Be a fighting chance against Windows. The world, like it or not, still equates “computer” with “Windows,” despite the inroads made by Linux and the reentry of the Macintosh as a serious desktop contender. It’s quite possible that many consumers won’t want to risk a different kind of computer with a newfangled desktop.
As Stephen Baker, an analyst for PC Data explains, “They are up against a much bigger, entrenched competitor. People in the industry may think [a different operating system] is better, but a general consumer wants the most popular widely distributed product, and that’s going to be Windows for the foreseeable future.”
Other “free PC” companies have already considered, and discarded, the notion of using an alternative operating system. Free-PC, perhaps the best known of the free PC companies, is instead offering a Compaq workstation running Windows, supported by ads that constantly stream across the desktop. Steve Chadima, Free-PC’s vice president of marketing, believes that “if you have Linux or Be, there are not enough applications that can run on them, and the customer isn’t getting what they expect from a PC.” He posits, “If all the consumer wants to do is check e-mail and surf the Net, do a little letter writing, then the applications that exist right now in Linux suites are more than adequate. But if people are taking work home from the office,” they will run into problems; don’t expect to use Excel, PhotoShop, HTML building tools or other complex software on a Net appliance.
And even though computer appliances like the iToaster and PIA are aiming for user-friendly interfaces that spare newbies from dealing directly with the operating systems, the designs aren’t foolproof. The PIA, which demo’d at LinuxWorld Expo, offered a clean front interface but problematic guts. Sure, you can open your word processing program with one button, but saving or retrieving your document requires navigating through hidden labyrinthine directories that only a Linux devotee could love. (The creators of the PIA are aware of this, and working hard to make it more amenable to newbies.) The iToaster, in turn, isn’t upgradable — you can only add the software that Microworkz will occasionally make available on its Web site, so if you don’t like what’s on your computer, you’re out of luck.
And those cheap, cheap prices? Many of these boxes don’t come with a monitor, so prepare to fork out an additional $150 or so, unless you plan to use your PIA or iToaster as a doorstop.
If the free PC start-ups really plan to take on the Wintel crowd, they have some work to do. Most don’t sell their wares through typical retail chains; the iToaster and iDot machines, for example, are only available online. And Microworkz has a reputation for not fulfilling orders in a timely fashion. Meanwhile, Microworkz has shown a lack of industry acumen, allegedly failing to ante up promised payments to its ISP partner EarthLink. The promise of free PCs is such, however, that even as the EarthLink lawsuit was filed, AT&T quickly stepped into Microworkz’s favored-ISP position.
Industry boosters are, of course, optimistic. Ebiz’s Rassas believes that the Linux-running PIA will be an even hotter product than the company’s Windows-based free PC models. Ebiz’s top-selling cheap Windows PC has only sold 72,000 units, he says, but the firm’s retail partners are estimating sales of 100,000 PIAs each quarter of the upcoming year. His optimism mirrors that of Microworkz’s Latman, who believes that “appliance computers” like his iToaster will eventually take over the entire marketplace. As Latman puts it, “We’re going to change the whole market; you’re going to see it section off. Traditional PC users, which will be a very small group, will go the left, and appliance users will go to the right.”
It’s still a bit early in the game to be this optimistic — after all, these are first-generation products in an as yet unproven market. But even naysayers like analyst Stephen Baker admit that if appliances really do take off, there will be a bigger market for operating systems like Linux, Be, Amiga and the MacOS. After all, the interface of an “appliance” doesn’t necessarily have to look like a traditional desktop; each interface could be customized for the purpose of the machine, so a user wouldn’t care whether it’s running on Windows or Linux — if, that is, the free PC makers succeed in making the back-end operating system invisible. As Baker puts it, “The Internet appliance will be a much less branded kind of business, because the operating system will be embedded in those appliances and you won’t know what they are. [Alternative operating systems] have a better chance at those.”
If nothing else, it’s hard not to hope that the new operating systems will succeed, if merely for the sake of taking a bit of market share away from Windows. “I think the day will come when we start to look at computers as a disposable commodity except in specialized areas,” says iDot’s Beardmore. “I would love to have a computer be totally agnostic to the operating system; I think the day will come when that happens. I would hate to think what the world would be like with only one operating system.”