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The good and bad of iPad pricing

I think all of us were surprised at the entry level cost of the new iPad at just US$499.00. In a recent article at ars technica it's stated that the pricing "confirms what a major shift in strategy the iPad is for Apple's business." My colleague Sang Tang also says the evidence is persuasive that the price of the iPad makes it disruptive for competitors.

Could be. I've talked to more than a few people who weren't considering the iPad until they heard that relatively low price point. Of course Apple has stripped the iPad pretty bare: there's no USB, no camera, no SD card, and so on. Certainly some of the Windows 7-based tablet computers will cost more, and they will have more features, but it's still rare that Apple finds itself in a position like this to compete on price.



There's one place where I think Apple has slipped up, and that is the premium charge for 3G access. They're charging 130 bucks for what can't be more than a 20 dollar chip, and from a tactics perspective, I think that's a major mistake. I might be drawn to the cheapest iPad, but if I am traveling for one week and want 3G access, my iPad is just a paperweight. I think it would have been better to have just three different iPad models, starting at $499 and ending at $699.

At that price, people might opt in and out of 3G service, especially since AT&T has allowed you to buy in one month no contract increments. Without the chip built in, people don't have the easy choice.

It appears that the 3G iPad also gives you GPS, but that's hardly an expensive option -- one firm is offering to add GPS to a Bluetooth chip for less than a dollar. Recently it was estimated that the 3G, power management, and GPS chips cost about $16.00 for the iPhone 3GS, so the cost can't be that much more significant for Apple. And of course, iPad owners who have built-in 3G capability would be tempted more than once to get 3G service. I know I would be.

But even with 3G, the iPad is a bargain, at least compared to what it could have cost. It has shaken up the consumer electronics industry, and I'm sure more than one company is looking at price adjustments. We're looking at you, Amazon and Barnes and Noble.

$130 for 3G is a lot to ask, and it would have been nice for Jobs to aim for consolidating a product line, rather than introducing it with six separate models at once. But even with those extra charges, it certainly seems like the iPad's price will definitely shake up the tablet market, and the eReader industry may not be far behind.

I think all of us were surprised at the entry level cost of the new iPad at just US$499.00. In a recent article at ars technica it's stated...