Amazon’s just-announced Kindle Fire HD LTE… has a killer feature that has nothing to do with its hardware or software. For $49.99 per year, Amazon is offering a data plan that gives users 250MB of data per month…
Amazon is using AT&T to provide the data service. So how does AT&T justify charging $180 per year ($14.99 per month) for everyone else using a tablet to access the same amount of data?
Obviously Amazon is going to be subsidizing some of the costs (or maybe not, see below), but really 250MB of data is laughably small for a 4G LTE device. Using LTE on my iPad I’ve gotten speeds over 32Mbps. At that speed 250MB of data will last you a whopping 63 seconds. So AT&T, what should we do for the remaining 29 days, 23 hours, 58 min. & 57 sec. of the month?
More Funny Math
For all other tablets AT&T charges $14.99 for 250MB of data but only $30 for 3GB and $50 for 5GB. So that puts the price of data at only $10 per GB if we ignore the 250MB plan. However, for the 250MB plan the rate is ~$60 per GB - 6x more than the other plans. How does AT&T justify this? They don’t and they cannot, it is not justifiable and completely outrageous. They’re counting on consumers to choose the cheaper plan and then charging them another $14.99 for another 250MB when they use up their data. But wait, what’s the overage charge for the other plans? Only $10 per GB.
Price gouging pure and simple.
So, back to Amazon’s “great” deal for Kindle Fire users where they get 250MB of data per month for only $49.99 per year. If we go by the actual rate of $10 per GB then 250MB of data per month should only cost $2.44 per month1 or $29.28 per year. Oh, and what if you use your Kindle for more than a minute on LTE and you go over your 250MB? According to the Ars article quoted above the standard $14.99 for 250MB overage charge will apply. Suddenly that $49.99 per year isn’t looking so good anymore.
So perhaps Amazon isn’t subsidizing the Kindle’s data plan at all but just somehow negotiated with AT&T to not gouge their customers on the first 250MB.