Regular readers of our blog will know that tablets have been a popular topic of discussion in recent months. Back in October 2010 I highlighted our concerns about the game of tablet forecast poker that appeared to be taking place as various analyst firms competed to proclaim the biggest estimate of tablet sales in 2011.
At the time we shared our view that Apple’s iPad was likely to dominate the market and that consumers were unlikely to commit to an additional monthly air-time subscription to get their hands on the latest shiny gadget.
With this in mind, I was astounded to see the iPad on sale for a mere £99 in my local Orange shop last weekend. I spoke to a shop assistant, who confirmed this was indeed the price and went to great lengths to point out what a fantastic deal it was.
Closer scrutiny of the economics of the deal revealed that our concerns about the viability of tablets in operator distribution channels are well-founded.
Orange is offering the 16GB iPad 3G at £99 plus a contractual commitment of £25 for 24 months. This means the total cost of the deal is £699. Once you’ve deducted the price of an unconnected iPad, you’re paying £158 for 24 months of network access. For that, you get 1GB of traffic a month between 4 PM and midnight, and 1GB a month outside those hours, as well as 3GB of Wi-Fi access via BT Openzone.
That works out at £6.60 a month — considerably better than any of the SIM-only deals Orange is currently offering (these include £7.50 for 1GB of traffic, valid for seven days but without Wi-Fi, or £15 for a monthly bundle of 3GB and Wi-Fi). And like any contract subscription, there’s also the “interest-free loan” to purchase the device.
Things get even better if you purchase the 32GB or 64GB 3G iPad. Once the cost of the iPad is removed, you pay £5.70 or £5.63 per month.
I believe there are a couple of quick conclusions we can draw from this.
If you live in the UK and you want to buy a connected iPad, there’s no better deal right now. Although with various reports suggesting Apple is poised to announce iPad 2 next week, you might regret your purchase sooner than you think.
More importantly, Orange’s deal underlines the fact that operator channels are just not suited to selling subsidised tablets at present – the returns don’t make sense. This view was reinforced by the messages we heard at Mobile World Congress that operators are getting cold feet when it comes to tablets. As a result most tablet-makers are turning to more traditional consumer electronics outlets, which will sell Wi-Fi-only devices or 3G models with a prepaid SIM-only subscription.
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