Amazon Lights Up AT&T's LTE in New Kindle Fire

Amazon.com Inc. (Nasdaq: AMZN)'s newest addition to the Kindle Fire family will include AT&T Inc. (NYSE: T) 4G Long Term Evolution (LTE) connectivity, the one "ultimate tablet feature" that Amazon CEO Jeff Bezos said justifies a price of $499.

Bezos introduced the new Fire, along with three Wi-Fi-only or 3G versions, at a press event today in Los Angeles. The first tablets unveiled had new features, but at lower prices than the competition.

The seven-inch Kindle Paperwhite e-reader will retail for $119 in Wi-Fi only or $179 for a 3G version. A seven-inch Kindle Fire costs $159, undercutting the Google (Nasdaq: GOOG) Nexus 7 tablet, and the Kindle Fire HD with multiple input multiple output (MIMO) Wi-Fi antennas will retail for $199 for the seven-inch version and $299 for the 8.9-inch tablet. (See Rumor: Amazon Firing Up 7-Inch Tablet Market? and Google's First Tablet Lights Fire Under Kindle.)

But, Bezos asked the audience, "What's the most popular price point for a tablet?" His answer was $499, the same price as the Apple Inc. (Nasdaq: AAPL) iPad and a few of the original Android tablets.

"So we asked ourselves, if we were going to sell a tablet at that price point, what would we put in it?" Bezos said, according to a live blog from the Verge. Thirty-two gigabytes of storage was not answer enough, he said, "so we went back to the drawing board, and decided that the only thing that could justify that price would be the ultimate tablet feature." (See Microsoft Surface: Where's the 4G Wireless?)

Enter LTE. Bezos said Amazon engineered its own wireless modem at 2.2 mm thick, but the 4G LTE modem Amazon splashed across the screen clearly belonged to AT&T. The breezily named Amazon Fire Kindle HD 4G LTE will come with 20GB of cloud storage, a $10 app store credit and 250MB of data per month -- a paltry amount of data, although it will only cost users $50 per year. (See Analyst: LTE Kindle Fire Coming Next Year.)

That brings the total cost of ownership to $549 for the Kindle Fire HD for one year. Comparatively, the LTE Fire's biggest competitor, the LTE iPad, adds up to $959 per year with data.

"We want to make money when they use our devices, not when they buy our devices," Bezos said in a dig to Apple. Amazon has a rich Web services businesses, and its line of Fire tablets has always been first and foremost about selling more of those services and products. (See Amazon's $199 Tablet Is No Loss Leader and Amazon's Kindle Fire Sells for $55 Over Cost.)

All three new Fires will run Android's Ice Cream Sandwich operating system. They are available today for pre-order and will ship in October. Amazon's announcement comes just days before Apple is rumored to be launching an iPad Mini at a press event on Tuesday. (See Apple Sizing Up Downsized Tablet.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile