Amazon’s Kindle Fire HD with LTE breaks mold with $50/year data plan

Santa Monica, Calif.—Amazon upped the ante in the wireless-enabled tablet space today by introducing the Kindle Fire HD, an 8.9-inch large-screen tablet equipped with LTE that will sell for $499. The new tablet will come with a $50 per year data plan from AT&T (NYSE:T), making it the most affordable LTE tablet on the market.

Although the $50 per year rate plan only provides customers with access to 250 MB of data per month, it does offer 20 GB of Amazon cloud storage and allows them to upgrade to additional data plans from AT&T and has Wi-Fi capability. In fact, Amazon noted that the Kindle Fire HD can automatically switch between the 2.4 GHz Wi-Fi band and the 5 GHz band, which is less crowded and therefore has better range and less interference. In addition, the device has dual antennas with MIMO capability (Multiple In/Multiple Out) to allow for higher bandwidth and longer range. 

Interestingly, Amazon also said it custom-designed its LTE modem to be just 2.2 mm thick so that it could keep the Kindle Fire HD device under 8.8 mm thick. The LTE modem supports 10-bands and is backwards compatible to 3G.  That's important considering AT&T has LTE coverage in just 60 markets nationwide, with plans to deploy another 47 markets by year-end.

But the Kindle Fire HD was just one of many devices Amazon introduced today. Amazon's founder and CEO Jeff Bezos also revealed additional versions of the Kindle Fire tablets, including a 7-inch and an 8.9-inch display. In addition, he revealed two versions of the Kindle Paperwhite, a 3G-enabled device as well as a Wi-Fi version.

"We want to make money when people use our devices, not when they buy our devices," said Bezos. "If somebody buys one of our devices and puts it in a desk drawer and never uses it, we don't deserve to make any money."

John Fletcher, senior analyst at SNL Kagan, isn't convinced that 4G LTE will be a game changer for Amazon, regardless of the price. "I think that there's a disconnect between how excited the industry is about 4G and what the average consumer thinks of 4G," he said. With tablets, "most people don't bother getting the 3G or 4G subscriptions," he added.

"The carriers are all in with M2M and these connected devices," Fletcher continued. "Machine to machine is a low ARPU business, but it's a very high margin business for the wireless operators… Machine-to-machine connected devices, Kindle Fire included, are a big part of that."

Indeed, Bezos used the 4G LTE feature to justify the $499 price point for the high-end Kindle Fire HD. After identifying $499 as the most popular price point for tablets, including Apple's iPad, Bezos said Amazon wants to have competitive tablets at every price point in the market.

"The only thing that could justify that price would be the ultimate tablet feature. What is the ultimate tablet feature? 4G LTE wireless," he said. "In less than a year, Kindle Fire is 22 percent of tablet sales in the United States. Nobody would have predicted this when we launched this product less than a year ago… This year we want the best tablet at any price."

The question is if customers will be willing to pay a $200 premium for a 4G LTE chipset and an extra 16 GB in the 8.9-inch Kindle Fire HD. The data plan certainly stands out as the most affordable of tablet-based cellular plans on the market, but 250 MB won't last long if customers plan to download any high-definition content like movies or TV shows.

"The 250 MB limit is a little bit silly, especially for a large screen tablet," Fletcher said. The 8.9-inch Kindle Fire HD with Wi-Fi only is priced at $299 with 16 GB of on-board storage.

"Customers are smart. Last year there were more than two dozen Android tablets launched into the marketplace and nobody bought them. Why? Because they're gadgets and people don't want gadgets anymore. They want services. They want services that improve over time," Bezos added. "Kindle Fire is a service… Hardware is a critical part of the service, absolutely essential."

The larger Kindle Fire HD features an 8.9-inch display, 1920x1200 resolution and 254 pixels per square inch in an 8.8mm thin body. The 7-inch Kindle Fire HD features 16 GB of storage and 1280x800 resolution and will sell for $199. Both devices are available for order today, with the 7-inch device shipping Sept. 14 and the 8.9-inch device shipping Nov. 20.

The Kindle Paperwhite features 212 pixels per square inch (62 percent more than the previous version), a 25 percent boost in contrast, paperwhite display, capacitive touch and a patented light guide that comes to Amazon after four years of research and development. Amazon claims that the device can get eight weeks of battery life even with the light on. The Kindle Paperwhite with Wi-Fi only is priced at $119 and the Kindle Paperwhite with 3G is priced at $179. Both devices are available for order today, with shipping scheduled for Oct. 1. Amazon also slightly upgraded its entry-level Kindle and dropped the price to $69.

"We love to invent. We love to pioneer. We even like going down alleys that turn out to be blind alleys. Of course every once in a while one of those blind alleys opens up into a broad avenue and that's really fun," Bezos said. "We want to have the best hardware, the best prices, the best content, the best interoperability and the best customer service."

Interestingly, despite rumors that Amazon would announce a smartphone today, that did not happen. The company has long been thought to be developing a smartphone. A smartphone fits squarely within Amazon's larger vision for digital media dominance. Unlike Apple (NASDAQ:AAPL), which relies on content from its iTunes digital media storefront and App Store to boost sales of hardware like the iPhone and iPad-- or Google, which looks to Android to fuel revenues derived from its core advertising and search services--Amazon depends on affordable hardware to drive sales of e-books, music, movies and related content offerings.

For more:
- see this press release and this release

Complete coverage: Amazon's Kindle Fire and mobile event

Related Articles:
Rumor Mill: Amazon will unveil branded Android smartphone today
Amazon could announce new Kindle Fire at Sept. 6 event
Report: Amazon to build Android smartphone
Report: Amazon building smartphone to fuel mobile content sales
Rumor Mill: Is Amazon preparing a smartphone for this year?
ComScore: Amazon's Kindle Fire grabs 55% Android tablet share
Does Amazon's tablet also portend an Android smartphone?
Study: Some Kindle Fire owners disappointed in lack of 3G/4G capability