What if Apple sold a $399 iPad?

Right now, click this link and check the price of the iPhone 3GS on new contract.... $49. For the past couple iterations, Apple has consistently kept the past versions of the iPhone around as a low-end model when introducing their new iPhone. This allows them to maintain the industry-standard price point of $199 on new two-year contract with their new phone while having a device at the lucrative $99 price point to snag customers who don't need the latest and greatest hardware. There is no reason to suspect they won't continue this practice once the iPhone 5 rolls around this summer and offer the current iPhone 4 at that same $99 price point. 

So here is the million-dollar question: why can't Apple do the same thing with the iPad?

The new iPad is long-rumored to include front and rear-facing cameras along with a new, higher resolution screen and perhaps a faster processor paired with more RAM. These are features that many people won't care about -- at least not enough to justify an extra $100. Apple could drop down the current 16GB WiFi iPad to a $399 price and place the line of new iPads starting at $499. That price point will draw many more people into the Apple Stores thinking they are "only" going to spent $399. Then, Apple can work their magic to up-sell customers to the $499 (or more) versions. 

Think of it like this: if you wanted to buy your parents or grand-parents a super-simple device they can use to browse the web, send emails, and play Solitaire, do they really need anything more than the current iPad offers?

Motorola finally announced the availability of a WiFi-only Xoom today for $599. That is a nice $200 off the price compared to the 3G version, and makes the 32GB Xoom competitive with the current 32GB iPad. But they still couldn't get the price down to $499 to compete with the 16GB iPad. Given a choice between the two at a local Best Buy, it is likely most consumers would still choose the iPad, Super Bowl commercials or not. If Apple could offer a $399 iPad to put next to that $599 Xoom, do you really think any average consumer (read: not an Android fanboy) would pick the Android tablet? 

Yah, me neither.