What's going on with Android 3.0 tablet pricing?

The annual Mobile World Congress opened this morning in Barcelona, and as expected, there were many smartphone and tablet introductions. One of the most important was LG's Optimus Pad, which will be sold in the U.S. by T-Mobile as the G-Slate. The Optimus Pad runs Android 3.0, has a dual-core processor and an 8.9" display--fairly standard so far as Android Honeycomb-based tablets go. The big shocker, however, was the price: According to Engadget, the Optimus Pad will be priced at 999 Euros, or the equivalent of $1,395 in the U.S. Even after you subtract the 19% VAT, its equivalent U.S. price is $1,075. That's almost $250 more than the most expensive iPad.

Motorola's Xoom Android 3.0 tablet, which has a 10.1" screen but otherwise is almost identical to the Optimus Pad, will be priced at $799 (U.S.) when Best Buy makes it available for pre-sale later this week. That's $30 less than Apple's price for its top-of-the-line iPad. However, Verizon is rumored to be requiring Xoom buyers to purchase at least one month of broadband data service in order to enable the tablet's WiFi interface. The least expensive data plan is $20/month, so that makes the price difference between the Xoom and the iPad only $10.

Last fall, the expectation was that WiFi Android tablets would sell for between $300 and $400, and their lower prices would give them an advantage over the iPad. Now, however, two of the three major Android 3.0 tablets announced so far are priced as high or higher than the most expensive iPad. (The third tablet, Samsung's Galaxy Tab 10.1, hasn't yet been priced.)

The iPad 2 is widely expected to be released in the next couple of months, and the big differences are likely to be dual cameras and a faster processor--the key features that differentiate the new Honeycomb tablets from the current iPad. The iPad 2 is almost certainly going to be priced no higher than the current model, so where is the market opportunity for Android 3.0 tablets?

We may eventually see Android 3.0 tablets from second- and third-tier manufacturers that are priced in the $300-$400 range, but Android tablets need to compete with the iPad now, not at some unspecified time in the future. The pricing policies of the first-tier manufacturers may end up giving the tablet market to Apple--or they may open the door for RIM's PlayBook (which the company's CEO said today would sell in a basic WiFi-only configuration for under $500) or HP's TouchPad, if HP prices it aggressively.