• by Mark Walsh  @markfwal, April 13, 2011

There's little doubt the iPad has almost singlehandedly created a consumer market for tablet computers, unleashing a legion of competing devices in the process. But a new report from Compete suggests that despite the growing popularity of tablets, there are still factors holding people back from jumping on the bandwagon. In particular, consumers have sticker shock when it comes to tablet prices, which typically start at about $500.

More than half (55%) of smartphone owners and 70% of cell phone owners say they won't spend more than $300 for the must-have gadget. And 7% each of smartphone and cell phone owners would consider a tablet only if it's free. When it comes to data plans, consumers weren't as turned off by the cost. Just under half indicated they would be willing to spend $15 or more on data plans.

Despite the fact that tablets don't work as well as dedicated devices like the Kindle for electronic reading, book-related applications are among the most downloaded category of applications on the iPad, according to Compete. Other popular downloads include games, weather, entertainment and social networking. Consumers may get what they want, if, as some tech industry experts predict, the flood of new challengers to the iPad this year leads to a price war that could push pricing on some tablets to $300 or lower by year's end.

Given the findings, Danielle Nohe, director, technology and entertainment for Compete, suggested manufacturers should look closely at finding the right price thresholds for tablets and data plans since the category is still relatively new. The study indicated Apple got the messaging right in marketing around the release of the iPad 2, highlighting features such as battery life, portability and ease of use. The Compete survey, fielded after the iPad 2 was released, found those were the three features people rated highest in importance for a tablet.

Apple also didn't increase the $500 entry-level price for the latest version of the iPad, while dropping the base price of the original to $400. The initial iPad sold nearly 15 million units in 2010, and some analysts believe the updated model could sell twice that many this year.

Though tablets may not work as smoothly as dedicated e-reader devices like the Kindle when it comes to electronic reading, book-related applications are among the most downloaded category of applications on the iPad, according to Compete. Other popular downloads include games, weather, entertainment and social networking.dedicated e-reader devices like the Kindle or Nook