High Prices Dampen Appeal Of Motorola Xoom

The Motorola Xoom Android 3.0 Honeycomb tablet comes with a hefty $799 retail price tag. Verizon's $200 subsidy does little to mute the Xoom's high cost.
The Motorola Xoom, with Android 3.0 Honeycomb, makes its official debut on Thursday at Best Buy and Verizon Wireless retail stores. It will cost $799 for the 3G+Wi-Fi version, which has 32GB of storage on board. If that's too much, Verizon is offering the Xoom at $599.99 with a two-year data contract. Monthly access charges start at $20 per month for a paltry 1GB of data.

The $799 price tag for the Xoom with 3G, Wi-Fi, and 32GB of storage is more or less in line with the price of the iPad 3G+Wi-Fi. The 32GB iPad 3G+Wi-Fi costs $729 and the 64GB iPad 3G+Wi-Fi costs $829. The iPad is not available at a subsidized price, and the 3G model does not require a monthly data plan. Users who wish to use 3G for data access on their iPad can buy monthly plans from AT&T at will, which cost $15 for 250MB or $25 for 2GB.

Even though the Motorola Xoom's retail price is comparable to Apple's iPad, the subsidized contract pricing from Verizon Wireless is a bit of a disaster for end users. Here's why.

First, the subsidy isn't all that great. Verizon is covering $200 of the Xoom's retail price -- but that still leaves customers on the hook for a significant $599.99 out-of-pocket expense. In my opinion, it would behoove potential Xoom customers to spend the extra $200 to avoid a two-year contract and the price tag that accompanies it.

Second, the contract offering is miserable. Users will be required to spend a minimum of $20 per month for two years, which actually adds $480 (plus taxes) to the cost of the Xoom. Instead of $599.99, those who purchase a subsidized Xoom will pay $1079.99 for it. On top of that, users who bail on the contract early will be subject to an early termination fee. (Don't even bother looking at Verizon's pre-paid data offerings. They are truly depressing -- and expensive!)

More to the point, 1GB of data for a month is simply pathetic.

To put 1GB in perspective, you'll reach that limit if you download between eight and ten high-quality MP3 albums from Amazon MP3, or if you download a single movie over the 3G network. Want to stream YouTube videos? Better be careful.

Verizon Wireless does offer more data plans above and beyond the 1GB minimum. For $35 per month, users can get 3GB of data; for $50 per month, users get 5GB of data; and for $80 per month, users get access to 10GB of data. Each plan has a $10 surcharge if users surpass their monthly limit.

Clearly, tablet data plans are being priced with the assumption that they'll be used via Wi-Fi most of the time.

The major caveat here is that the Xoom can and will be upgraded to LTE 4G later this year. The upgrade will be free, though it will require a technician's help. At the moment, no other tablet can claim that it will be updated to 4G free. But Verizon Wireless hasn't made clear if or how data plan pricing will change once the Xoom is updated to LTE. Will it cost less, the same, or more? And what about the mobile hotspot feature?

These costs should be spelled out more clearly by Verizon Wireless for those who are signing two-year contracts and expecting to take advantage of LTE 4G data services.

Bottom line: If you want the Motorola Xoom, do yourself a favor and spend the extra $200 at the cash register to own it free and clear.