Dell says PCs bundled with Internet access are costly

Michael Dell has warned that cheap PC offers based on Internet access contracts are like a timebomb waiting to go off, even though the vendor announced a similar deal last week.

The chief executive of Dell said he believed many people signing up for these deals, where they get a cheap or even free PC in return for committing to a long term contract with an Internet service provider, would come back unhappy within 18 months.

"This kind of deal is not the best thing for the consumer - it's like high rate financing? - but a lot of people seem to be very interested," he said.

Last week Dell announced a $400 rebate offer for customers buying a Dell PC who also signed up for a three year Internet service contract with the company's service provider, Dellnet. He said Dell actually made more money from this sort of deal because of the nature of the financing.

One of Dell's main criticisms of many of the combined 'cheap PC with Internet access' deals was that they locked people into low speed ISP contracts for many years at a time when broadband access was about to shake up the market and offer much better value. These deals have proved even more popular in the US than in the UK because US Internet users still have to pay to get Internet access.

Dell's recently announced rebate offer at least has built in the opportunity to upgrade to broadband access when available. But Dell admitted there are other downsides to cheap PC with Internet access deals. Not only were they an expensive way of buying a PC, but the PC can start getting out of date in that time, being unable to run the newest applications.

Dell claimed the vendor tried to make the deals better value by offering PCs that would remain current over the three year lifespan of the deal.