Intel and the Pricing of Mobile Internet Devices

Implications: The entry of Intel into Mobile Internet Devices could be determined by the pricing of their latest chip technology as well as the overall retail price of the devices to consumers.

Analysis: Intel’s latest chip technology to launch Mobile Internet Devices (MIDs) could test how much consumers are willing to pay for a better Internet experience in the mobile lifestyle.   If the MIDs are more functional for mobile Web use, will consumers pay $400-$500 for the MIDs as Intel is projecting with chip prices ranging from $45 to $160?  Most consumers select a carrier primarily for reliable voice quality, and choose the device based on other needs for messaging, music and content.  Smartphones combine voice and data as a practical mobile tool.  And smartphone prices are generally reasonable because carriers subsidize the handset from the contracted voice billing.  The majority of consumers are unlikely to risk the voice quality of a carrier network on a smartphone for VoIP communication on a MID.
For MID success, the United States would have to follow other markets with consumers using multiple devices.  But RIM’s fourth quarter results of shipping 4.4 million devices and adding 2.18 million subscribers show the “prosumer” effect of users preferring one device.  The MID becomes attractive to a smaller market segment like young adults relying on Internet applications.  A successful marketing tactic to lower the consumer price could be that cable MSOs subsidize the cost by selling a bundle with TV services and fixed broadband at home.  Intel might exploit the revival of Sprint’s defunct Pivot alliance with Comcast, Cox Communications, Time Warner Cable and Bright House Networks.  Intel’s competition will include Qualcomm launching its Gobi chip that uses either EV-DO or HSPA. 
At the 2008 CTIA tradeshow, Nokia was promoting the future of Internet tablets with its upgraded N810 unit.  The timing could be right for Intel with Internet appliances as Google’s Android and Verizon’s open access start a trend of devices that are unlocked and not subsidized by a carrier and tied to a voice contract.