On The Eve Of The iPad Announcement

Previously I wrote about which tablet I am considering buying next, and next I want to write about something that is strongly influencing my tablet purchasing decision, and I suspect it is influencing many other people too, that is price. So far the iPad is the only credible tablet that is not only being sold by a mobile carrier, nor requires a mobile data plan. Put another way, the iPad is the only WiFi-only tablet on the market, and that makes it the cheapest credible tablet on the market.
To buy the Motorola Xoom or Samsung Galaxy Tab at the lowest price, you need to commit to a two year monthly data contract, averaging around $20 per month, adding $480 to the cost of the tablet. No matter the price of the Xoom or the Tab, that is $480 more than you have to pay for the cheapest iPad for a one time purchase of $499. I am willing to bet that Apple will announce a WiFi-only version of the iPad 2 tomorrow.
In a interesting piece, Horace Dediu writes about the difficulties operators have with selling tablets. I think the matter is pretty straight forward, few people can justify spending $1,079 ($599 purchase price and $480 total data charges for 2 years) for a device they don’t need. In a recent poll conducted by Gigaom, 76.9% of the respondents indicated they think WiFi is good enough for a tablet.
Until their competitors provide WiFi-only tablets, Apple will continue to dominate the tablet market. Samsung and Motorola might be happy with their sales, because the operators are making commitments to buy a set number of units, and are paying them subsidies with each contract the operator sells, but they are limiting their market. James Kendrick thinks that companies like Motorola and Samsung cannot compete because they cannot meet Apple’s aggressive price. He rightfully points out that without the subsidies, the competitor tablets have a much higher price. For example, the full retail price of the Motorola Xoom is $799, cheaper than the total cost of $1,079 if you add a data plan, but much higher than the $499 WiFi-only iPad.
Imagine what might happen if Apple announces tomorrow that they will continue selling one of the current iPads for $399 or even $299? While most await tomorrow’s iPad announcement to see what new features Apple will add, I am more interested to see how much they will cost. I think Apple could place a big stranglehold on the tablet market before their competitors get out the door with an aggressively lower price model, and I got to believe Apple knows it.