Why Are Net Appliances a Hard-Sell?

Would you pay full price (or close to it) for a stripped-down economy car that tops out at 35 mph and limits where you can go?

Probably not. And for pretty much the same reasons I won't buy an Internet appliance anytime soon.

Internet appliances have been the next big thing in personal technology for years. Pundits of yesteryear had predicted that by now devices like Netpliance Inc.'s I-opener would be chipping away at the desktop PC as the primary way people access the Internet.

That hasn't happened, even though Web-based applications are slowly making their way to the Net, and appliances are getting simpler. On the surface, an Internet appliance seems like a perfect answer to consumer complaints about complicated--and pricey--PCs. Simple to operate, ready to go at the touch of a button, and low in cost, a Net appliance aims to do just those few things you really need it for, such as e-mail and Web browsing. Anybody can use one.

But the market for idiot-proof Internet devices remains weak. The few products that have hit the market have not captured the public's imagination. I'm a proponent of simplified "Web appliances" or "information appliances" that focus on doing a few things really well, minus the hassles of a PC. And I do believe Net appliances have a chance to become a hit with the public: It's just a matter of when.

Net Appliances Make Slow Start

One major problem not factored into the optimistic predictions of a couple of years ago is that Net appliances aren't all that cheap compared to PCs these days. The dearth of services and applications that would give these products some panache also doesn't help.

Netpliance's recent move to quadruple the price of its I-opener Internet appliance from $99 to $399 and delay shipments until the fall can't be a good omen for this product category. Neither are soft sales of similar Internet appliances sold by Cisco Systems Inc.'s InfoGear subsidiary and Cidco Inc.'s MailStation. Appliance makers admit they face an uphill challenge to push this new class of devices onto the market.

Less for Your Money?

That's why I groaned when I heard about Oracle Corp. founder Larry Ellison's network computer venture in June. Five years ago, Ellison came up with the idea of a computer powered by a remote network instead of an individual operating system. Ellison, who originally bragged he would sell 100 million of these devices, was mocked when the Network Computer was scrapped after lackluster sales.

Now Ellison is behind the New Internet Computer Company; http://www.thinknic.com, which began selling $US199 mass-market Internet appliances, plus $US129 monitors, in July. The New Internet Computer, or NIC, has no hard drive and runs on Linux. Like its brethren, it surfs the Web and retrieves e-mail--but does little else. And the price doesn't include the monthly ISP service.

These not-quite-PC devices just seem like less bang for not a whole lot less buck. I question whether NICC and Netpliance can compete with cut-rate computer sellers like PeoplePC, which sets you up with a 400-MHz Toshiba Corp. desktop for $US25 monthly (including Internet access), or Emachines Inc., which will sell you a 500-MHz PC for $399 (sans monitor).

By Christmas, a half-dozen more Internet appliances will likely be on the market. Microsoft and America Online will vie for attention in our kitchens with devices that link you to their networks. AOL's device will let me read e-mail and browse the Web (presumably to look up recipes), while I'm making toast. Oh boy!

Coping With Appliance Envy

The electric can opener and microwave oven are consumer staples. That's because millions of tin cans need opening, and freezers around the world are stuffed with microwave dinners waiting to be nuked. Net appliances are more like toasters before the advent of sliced bread.

A useful kitchen Web appliance would connect me to all the neighborhood brick-and-mortar businesses that deliver services to my home. Without picking up a phone, I could order from the pizzeria down the street. But that neighborhood infrastructure doesn't exist today.

Virgin Entertainment Group PLC may have hit on the right idea with an expensive experiment. It's distributing 10,000 Virgin Connect Webplayers that let you exchange e-mail, surf, and--most importantly--shop at Virgin online stores.

Virgin hopes to recoup hardware costs through sales and on-screen advertising.

Virgin's success has yet to be determined.

As for the consumer market, systems like the I-opener and the NIC may be destined to struggle until they can take advantage of an existing infrastructure in a unique way.

Net-Centric Successes

In fact, some network appliances are finding success today, just not among consumers. Ironically, for the same reasons Internet appliances have struggled in the consumer space, a shirttail cousin--the simplified or "legacy-free" PC--is popular in the business world.

Among the best-known products in this category are Compaq Computer Corp.'s IPaq and Hewlett-Packard Co.'s E-PC. Though not marketed as Net appliances, and in many ways much more capable machines, these products share many of the concepts of a "pure" Internet appliance. Corporations like them because they are simple and reliable. In the corporate world, the fact that they lack the muscle to run graphics-intensive games is a plus, not a minus.

For example, Compaq's $US499 IPaq sheds "legacy" ports and connectors common to PCs. It has an integrated video and sound card and is optimized to plug in to a company's network. Instead of playing games, employees can save data across networks and use a Web browser to access company data and applications hosted on a server. When Dell Computer tried to introduce a similar PC for consumers earlier this year it failed.

Dell canned its stylized $US999 WebPC, which lacked traditional PC accessories such as expansion ports. Aside from its goofy looks, steep price, and odd name, the WebPC never took off because it was marketed as something less than a traditional PC at a very traditional price.

In Search of a Problem

Just as network-centric devices need to connect in order to provide reliable and meaningful services in the corporate world, so do consumer Internet appliances. The hunt for a killer application for the Internet appliance is on.

As for me, it will take a lot of time before I trade in my beige box for an Internet appliance. It will take even more time for me to entrust my scheduling, e-mail and even word processing to an Internet device with all my data stored somewhere out there on the Web.

Get back to me about Internet appliances when the pizzeria down the street signs up, too.

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