By: Michael Godfrey
The original iPad was revolutionary. It changed computing, in the same way the iPhone changed the mobile phone. The iPad had everything a tablet should have but the thing that was interesting was the inclusion of cellular antennas and a data plan that defied what most carriers would allow; a no commitment contract.
Yet, that came with a compromise, if the user wanted the ability to use cellular data they would have to pay the premium of $129 for this option. The question is though, why? Why does Apple believe the cellular data is a premium. is it really worth the extra cost?
According to iSuppli.com who preformed a pricing per part breakdown of the previous iPad 3, the antennas which are supplied by Broadcom total $41.50 to add to the iPad. That is a far stretch from the $129 premium Apple adds for the option, considering that the data plan starts at a minimum of $10 if adding to one of AT&Ts new mobile share data plans, but caps out at around $30 a month with Verizon's LTE coverage.
When asked if he regretted his purchase of a wifi only iPad, Josh Yates posted on everythingicafe.com ,"I go back and forth. However, I'm so rarely away from wifi, I just can't justify the extra cost. The GPS chip is enticing, but not $130 enticing."
Most argue that Apple and the carriers need to adopt the "razor" method of consumerism and provide the razor, or in this case the antenna for free and charge for the blades, or data.
"I would gladly pay for the data plan, if I didn't have to include paying for antennas in my total cost," said James King of Thornton, CO when asked about his iPad purchase choice.
At the time most users accepted this, but as the iPad was refreshed it became common for the Mac blogs to rumor that this next upgrade would stop the separation between models.
Yet, another iPad is released today and still the separation. The new iPad 4 includes a faster processor, the new lighting connector and a improved camera. There was as in the past a separation between wifi and cellular models, leading to frustration to some uses but most will just resort to using the tethering on their LTE enabled iPhones
"I thought the same thing but I figured if I ended up needing traveling data, I would just add the hotspot feature to my AT&T account," said Richmond Moore of Westminster, CO.
Tethering is a decent substitute for iPad connectivity if you rarely need to connect your iPad away from Wi-Fi. Just consider thought that if you’re going to be using your iPad over a cellular network on a regular basis, it’s might be a better idea to get a 4G LTE iPad with its own plan.
The choice as we have seen still remains, and most users have accepted the optional pricing as part of Apple's strategy to offer the best iPad for everyone at any price point.
The new iPad and the newly announced iPad mini are set for release on November 2nd for the wifi models and in mid November for the LTE versions.
I'd love to see a single model, but doubt it happens anytime too soon. The markup from 41 dollars in component costs to 130 at the register is right in line with the overall markup for most apple products. I'm no expert, but seems like a lower price would give the lte iPad a lot worse margin than the wifi.
ReplyDeleteWhere the razor analogy is concerned, that only works for companies selling both parts of the widget. Gillette wouldn't be as likely to sell the razor close to cost if somebody else sold the replacement blades.
Alan, I understand your point regarding different providers - and therefore Apple not having a direct financial incentive for providing a lower cost LTE solution (or single model). Where I'd probably however agree with Michael Godrey is that in light of the overarching myriad of upgrades Apple just announced, obviously Cupertino is showing some propensity to sacrifice gross margin to increase sales volume. The iPad Mini, new iMac, and iPhone 5 are all testaments to this shift in strategy. A single model iPad with more capability could absolutely deliver greater overall sales. In that event we also have to keep in mind there are revenue streams beyond the initial sale. It would be interesting to see if LTE models have any greater App downloads, media purchase, etc - due to being able to impulse buy from anywhere. If that's the case, a lost initial markup could be made up for over time using a more Amazon centric strategy of post purchase micro sales.
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