Your Next Laptop Will Probably Come With a Contract and Data Plan
We’re used to always-on connections with our phones, but with laptops, most of us are still tied down to Wi-Fi hotspots or smartphone tethering. While 4G laptops exist, many people who buy them never activate cell service. Verizon data plans start at $20 for a measly 2GB of data. Spending extra on a limited data plan when the network isn’t much faster than most widely available Wi-Fi is a hard sell.
But 5G promises faster download speeds over the air than most people get at home, and once it is ubiquitous, it could free the laptop from Wi-Fi. Why spend the effort to get on the Starbucks Wi-Fi that gets 10 or 20 Mbps when a 5G connection could get 1000 Mbps?
Computer makers like Lenovo, which last week unveiled the 5G laptop that will be the first sold in stores this spring, are betting that consumers will opt to keep their laptops connected to 5G all the time. That’s a big opportunity for Lenovo, but it’s an even bigger opportunity for cell phone carriers.
For carriers, which have to continually upgrade their networks to stay competitive, nothing is more valuable than a committed customer. This is why they have tried every trick in the book to keep customers on their network and prevent them from switching, including carrier-specific versions of a phone that couldn’t be used on other networks and the infamous two-year contracts that used to be common at every carrier. Carriers even resorted to selling phones that could technically be used on other carriers, but came with a software lock that prevented customers from switching without the carriers’ permission. This practice was eventually outlawed, although the FCC still allows a temporary 60-day lock.
Two-year contracts, in which customers would receive a “free” or reduced price phone in exchange for a commitment to stay with the company, were carriers’ greatest weapon. Until they weren’t. As smartphone prices started to skyrocket, carriers had to eat more and more of the hardware cost, cutting into their profits. Eventually, carriers switched to their current model: Phone buyers would pay a monthly fee for the device — usually the full cost of the device divided by 24 — and stick with the carrier as long as they still had payments left. Which, conveniently, worked out to the same two years carriers once wrote into their contracts. The difference is that now, customers can pay off the phone early, or even pay for it all up front, and enjoy a lower monthly bill and the freedom to leave whenever they want.
The trouble — for carriers, anyway — is that while customers still often finance devices, they nearly as often choose freedom. According to market research firm Civic Science, 44% of smartphone owners pay for their device with a monthly plan, while 39% bought their device outright from a carrier, third party, or someone they know. With a bulk of customers now choosing to own their devices outright, carriers have to rely on the strength of their network to keep many of their customers loyal.
The transition to 5G will be a boon to carrier financing plans. At least at first, 5G laptops will likely be more expensive than even the highest-end smartphones. Lenovo’s new laptop, the Yoga 5G, for example, will cost $1,500, more than the costliest iPhone. The company also showed off a foldable 5G laptop at CES that is due out later in 2020 and will cost consumers $2,500. Price tags like these may be easier to swallow in smaller monthly payments. By dangling 5G connectivity, carriers can entice users to buy laptops with financing plans, the same way they buy phones today, and in doing so, bundle a data plan with their device payments — locking them into coverage until their device is paid off.
The experience might be so similar to how consumers buy laptops today that they may not even notice the lock-in at first. Retailers like Best Buy and Amazon, as well as PC manufacturers themselves, offer financing deals for big-ticket items like laptops, and Apple even offers its own credit card and financing deals to help get customers in the door. Paying a monthly fee for a laptop from a carrier might not seem all that different. Customers might even save on interest, depending on the financing terms.
Some carriers are already laying the groundwork for this strategy. In 2018, Sprint announced that it would start selling Intel-powered 5G laptops by 2019. The development of those laptops has taken longer than expected — which is par for the course for 5G development across the board — but the company already has 5G devices for sale on its site that come with the familiar monthly payment option. Just like buying a phone, customers can spend $600 on the HTC 5G Hub outright, or pay it off over two years for $12.50. Customers will need to stay a Sprint subscriber until the device is paid off, naturally.
Deployment of 5G is still an ongoing process in the United States and will take years to complete (though it is well underway). Building the network is expensive, and carriers will want to lock in as much reliable revenue as they can while they build out their infrastructure. The appeal of an always-on laptop, with financing and 5G cell service rolled into one bill, could be a powerful tool to do just that.