Why Subsidized Pricing for Samsung’s Tablet is a Bad Idea

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Of all the Android-based tablets to hit the market later this year, Samsung’s 7-inch Galaxy Tab Is one of the more impressive iPad competitors. However, if the rumors that its price will be carrier-subsidized at somewhere between $200 and $400 turn out to be true, it’s in big, big trouble.

For most people, tablets are a third portable device after cell phones and laptops. Your cell phone is carrier-subsidized by its very nature, and your laptop either has no 3G or 4G cellular connection or, if it does, you have plenty of relatively affordable options that don’t necessarily require a contract–Virgin Mobile’s unlimited 3G data for $40 per month, for instance.

So why would these tablet makers think that they’d be able to sell massive numbers of these devices while requiring customers to add a second, or even third, monthly data plan? I don’t know about you, but there’s no way I would pay $60 per month for two years for the privilege of being able to buy a tablet for even the lowest estimate of $200. And I work in this industry.

That adds up to $1,640 when all is said and done, assuming it’d require a $60 per month data plan offered by most carriers. Even the $15/200 megabyte-per-month plan from AT&T works out to $560 before taxes.

Samsung would surely be able to sell a handful of tablets using the $60-per-month subsidized pricing model, but there’s no way it’d be able to reach the critical mass required to compete with the iPad. The $15-per-month AT&T plan would actually be somewhat enticing, as it’d find the Galaxy Tab at $560 versus the 3G iPad at $629—but that’s assuming a) that plan would be offered, b) the Galaxy Tab would only cost $200 subsidized, and c) that the price of the 3G iPad wouldn’t drop.

The bigger issue here, though, is the assumption that people want a cellular chip inside a tablet. If it’s there as an available option, fine, but if people are going to add any sort of additional cell plan, they’re better off going with a portable hotspot that can share the connection with multiple devices such as laptops, netbooks, and Wi-Fi-enabled tablets for the same monthly price.

The whole idea of these iPad competitors should be to compete on both features and price, not just one or the other. Tablets with only Wi-Fi connections should start at no more than $499, while tablets with 3G connections should start at no more than $629, unsubsidized.

More on Techland:

Samsung Galaxy Tab: The Specs Sheet

‘Rover’ Prepaid, Unlimited 4G Broadband Starts at $5 a Day

Virgin Mobile to Offer $40 Unlimited Prepaid 3G Data Plan

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