Monday, August 30, 2010

Kindle and iPad: 3G or not 3G?

Given how much risk aversion and the cost of acquiring information affect people's decisions, I wonder whether the makers of the iPad and the Kindle are turning away potential customers by offering both a Wi-Fi only and a Wi-Fi + 3G version of their products.

Both the Kindle and the iPad are gadgets unlike anything else most of us have ever owned, so it's hard for us to know exactly how we'd use them. Whatever the customer decides, he is set up for second guessing.

If he gets the Wi-Fi only Kindle, he might find himself in many situations where Wi-Fi isn't available and 3G would have come in handy.

If he splurges for the Wi-Fi + 3G model, maybe he'll discover that he just uses the Kindle around the house after all and will lament wasting $50 for the 3G option.

It's even worse for the iPad: Not only does the 3G-capable version cost $120 more, it also requires a 3G data plan that runs about $15 a month. Luckily, diehard flip floppers can cancel the data plan at any time, thus cutting their losses somewhat.

Classic economic theory tells us that more choice can only make consumers better off (how can a new choice makes us worse off if the original choice is still available?). But, as I've argued before, perhaps retailers (or regulators) should make decisions for us when the choice is too technical for most people. The book "The Paradox of Choice" suggests that consumers might even be paralyzed by some decisions, to the point of not making the purchase.

For what it's worth, a while ago I happily bought the second-generation Kindle, which only had 3G (you don't really need Wi-Fi if you have 3G) and thus spared me the research and soul-searching required to decide whether 3G was worth the extra money.


Josh Hattersley said...

Lazy consumer is lazy ^_^

While Apple is almost certainly making more money on the 3G models (there's no way the radio costs an extra $120), it's a feature I'd be willing to pay for. The iPad doesn't "require" a subscription; you just need one to use the 3G functionality. Due to the non-monthly nature of said subscription, you can pay the $15 for any month in which you'll be traveling or in need of 3G, and then not pay again until you need it.

But because the feature is being tacked on at an additional cost, I think it's a good idea to leave it up to consumers. Unless the only option were Wifi and 3G bundled (with the 3G data plan optional, as it is now), getting rid of the Wifi-only options would drive the average price of the device upward, and eliminate the handy marketing point of "as low as $500" that Apple can use now.

The only reason the Kindle can offer free 3G is because of the low-bandwidth, low-capability nature of the device. You can't download apps, media, or anything very large to the Kindle. The iPad, on the other hand, can be a heavy-bandwidth device depending on the user.

Greg Finley said...

Good point about different file sizes between iPad and Kindle.

Though I have to quibble with the example of people using the iPad 3G one month and then not the next. Do people really do that? Seems like it would require a lot of planning ahead.

Josh Hattersley said...

Not at all; you can actually initiate a one-off month's purchase of 3G service from the device, without having to actually talk to AT&T. You're then allotted the bandwidth you've paid for (250MB for $15 or 2GB for $25), will receive messages whenever your usage grows close to your limit (if it does at all), and can cancel as soon as you get back.

The only thing I'm not sure about is whether the one-off payment actually initiates a "subscription" that needs to be cancelled, or if you can specify that you'd only like to purchase a month's service plan. Either way, though, you can set everything up from the iPad itself (including the cancellation if that is indeed necessary), so it's not a big hassle, nor should it require any planning.

Greg Finley said...

Fair enough.

Have you bought one?

Josh Hattersley said...

Nope; if I had more disposable income lying around I would, but it's just not really something I vitally need. (Also doesn't help that I just purchased a brand new MacBook Pro last month.)

If I did buy one it'd be the 3G model, though. I'll probably end up picking one up when revision 2 rolls around.