Cellular data contracts doom Android tablets

New data from NPD confirms something I claimed in February: "The real reason Android tablets don't stand a chance against iPad -- onerous monthly data fees". American consumers simply aren't opting for 3G/4G, preferring WiFi for tablets instead. That's good news for Amazon Kindle Fire and Apple's iPad, particularly, but doom and gloom for Motorola Droid XYBOARD and other tablets requiring onerous, two-year data contracts from cellular carriers.

In April, NPD surveyed tablet owners about their wireless connectivity. Sixty percent said WiFi-only but 5 percent planned to add cellular broadband within six months. Fast forward to December and 65 percent are WiFi-only. So much for buying/adoption intentions.

NPD's data is a cautionary tale about something else -- surveys from ChangeWave and others measuring buying intentions. The Apple Fanclub of bloggers and journalists are giddy writing about these, because so many people say they'll buy iPad or iPhone. What people say they will do often reflects what they'd like to but not often what they do. NPD's survey data is excellent example of this. Cellular connectivity is an appealing benefit, until tablet buyers look at the real-world monthly costs and two-year commitments and weigh them against their behavior (how much the tablet will go out and about) and WiFi availability (free in coffee shops and malls).

"There are multiple reasons for greater Wi-Fi reliance", NPD's Eddie Hold says. "Concern over the high cost of cellular data plans is certainly an issue, but more consumers are finding that WiFi is available in the majority of locations where they use their tablets, providing them 'good enough' connectivity. In addition, the vast majority of tablet users already own a smartphone, which fulfills the 'must have' connectivity need".

The difference also reflects changing marketplace, moving from early adopters to the mainstream. "There is a relatively low mobile connection rate for tablet users today in light of the fact that these were early adopters, and therefore less price conscious than the mainstream", Hold says. "If there is not an ongoing need for these early adopters to be always-on, then the carriers clearly face challenges with the larger consumer audience moving forward".

Hold's analysis jives with what I asserted in February, without supporting data. I posted partly in response to uberblogger Robert's assertion: "The only thing that matters is the apps". He's wrong -- then and now. "What matters more is the price -- how much more people pay for one product compared to the other", which is the context I put extra-cost data commitments: "Apple sells iPad with or without cellular network radios. Buyers can choose WiFi only. Even if they buy a 3G model, the data plan is optional and there is no contractual or time commitments. That Verizon can sell iPad without 3G (since the radios are for AT&T), shows there is demand for the right tablet that offers just WiFi".

That said, last week, I received Motorola XOOM LTE from Verizon, putting me in the camp willing to pay monthly data fees. But an unbelievable Black Friday sale made the math work for me. I paid $199.99 for the tablet before taxes. The comparable Apple tablet, with 32GB storage, sells for $729. XOOM LTE then has, comparably, a $529.99 credit to apply against data service -- 17 months against the 24-month contractual commitment. That's by comparison.

The math works against XOOM's successor, the Droid XYBOARD, which Verizon announced days after my tablet arrived. Prices for the 10.1-inch model range from $529.99 to $729.99 -- or about $100 less each for comparable iPad 2s. However, data plan is optional for Apple's tablet, but mandatory for Moto's, putting the two-year cost for the model comparable to my XOOM at $1,449.99. Is cellular connectivity really worth that much more, when WiFi is so readily available? For many people, the answer is no.

On Saturday, I asked readers if they would spend $530 to $730 for Droid XYBOARD. Many readers' responses jive with NPD's findings. Alex Right: "Too much for a tablet, I think".

"Motorola wont be selling many of these. Havent they learned no one will give you $600 for a tablet with a contract", writes bibleverse1. "When the price is $149.99 with a 2 year contract they will fly off the shelves". I'd say $199.99, since that worked for me.

Photo Credit: Joe Wilcox