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Peter Jarich |
Last month I talked about my impending drive cross-country in the hotspot-equipped 4G SUV. For those of you who've been anxiously awaiting the results (I know you're out there), it went well. Even with a signal booster, we lost coverage a few times, which was particularly disappointing given that we were on an Interstate. Generally, however, the set-up worked well, network coverage was decent and a 7" tablet makes an excellent GPS and auto diagnostics monitor. If one thing came up short, it was figuring out how to mount the stupid thing in the cockpit. A standard windshield-based suction mount put the tablet too far from the driver. Mountek makes a great set-up that supports a phone using the CD player slot that's quickly become the equivalent of an appendix--a vestige that just doesn't really serve a purpose anymore. It doesn't open wide enough to support a tablet. Ultimately, I created a Franken-mount that combined the two. It was far from perfect, but it got the job done.
A few days after we arrived on the West Coast (fighting some intense Burning Man traffic to get from Reno into Berkeley), I found myself down in Santa Monica at Amazon's Kindle Fire HD launch. If you've seen our analysis, you know our take. If you haven't, just ask, and I'll see if I can get you a copy. Beyond the multiple models and Jeff Bezos' somewhat surreal lecture on the basics of MIMO, one of the most interesting parts of the launch was the service component available with the LTE version.
The $50 annual plan with 250 MB of monthly data (and a $10 Amazon credit) builds on the notion that tablets benefit when they can be connected to more than WiFi. It also builds on the dynamic of operators trying to drive connected tablets into the market, both as a strategy for growing traffic on their networks and a strategy for growing service revenues. Of course, this isn't new.
Not long after their introduction, operators were exploring ways to monetize tablets; a year ago, per our research, 26 percent of the tablet SKUs offered through carrier channels were attached to a contract, subsidized like a smartphone and attached to a service offer. A year later, that share was cut significantly (down to 8 percent) while the total number of tablets being offered has grown. The data behind the actual number of models offered and who's offering them is something we could spend days on. Yet, where there's no shortage of reports documenting that WiFi-only tablets dominate sales, operators, it would seem, have recognized that attaching tablets to long-term service plans--even if it brings down the price--isn't viable.
This is what makes Amazon's service bundle so interesting. It's not directly being driven by an operator (though AT&T benefits). The data allotment isn't enough for solid 3G or 4G tablet usage; it's not nearly enough to support the multimedia content consumption Amazon is pushing. It may, however, give people a taste of mobile data and and spur them to buy more expensive plans. This is a similar, at its core, to the philosophy behind shared data plans. Make the initial investment an easy one in order to convince an otherwise dubious consumer. Of course, we also would note that, in our analysis, Amazon has not quite reached its goal with the Kindle Fire HD with LTE. The Kindle's value proposition is based on broad content availability at a significant hardware discount to the iPad. The LTE version of the Kindle Fire HD is $499, which is the same price as the iPad without LTE. That's too close for comfort (or impulse purchases), and only looks like a bargain if consumers assign fairly high value to the connectivity before buying it.
If one thing was conspicuously missing from Amazon's launch, it was any discussion around application or content-based pricing. Why conspicuous? Amazon was lauded as revolutionary when it first bundled the cost of cellular connectivity into the price of Kindle e-books. When it announced its first cellular-enabled tablet aimed squarely at content consumption, it was only natural to expect something similar. No such luck. To be sure, the cost of delivery (the data "tonnage") would likely be prohibitive. Conveying the price bump to consumers wouldn't be easy. But would it be impossible? What about teaming up with some of the innovative delivery and caching solutions that network and device vendors have proposed or introduced? Isn't this the sort of thing we look for disruptors to introduce?
Putting tablets on contract and subsidizing them may have fallen out of favor, but it's too early to declare the triumph of the WiFi-only tablet…at least if operators (and their partners) have a say. Now, if only we can drive more pricing and service innovation around tablets and serve up a good way to mount them in my car!
Peter Jarich is the VP of Consumer and Infrastructure at Current Analysis. Follow him on Twitter: @pnjarich.