Ars Technica reports that the upcoming Motorola Xoom will launch at $799.99 and will require a data plan from Verizon to enable WiFi networking. That’s right, there’s no escaping a data plan, WiFi will be crippled unless users sign up with Verizon for at least one month.

I’d been watching the Android Honeycomb powered tablet since CES in the hopes that it would offer the iPad some real competition and be a viable option for reading eBooks. But launching at a higher price than the base model iPad makes this unlikely. It also raises a lot of questions about just how much it costs to manufacture the Xoom and the role Verizon plays in all of this.

Some estimate that it costs about $230 to manufacture an iPad. So even the $500 entry model nets a nice profit for Apple in the hardware alone. It seems reasonable to expect similar manufacturing costs for the Xoom. If not, then that would be the first part of Motorola’s problem. It is understandable for Motorola to pitch their new tablet as better than the iPad with a price to match that perception. But given the newness of the tablet market and the huge head start Apple has in both sales and mindshare, a high launch price and onerous data plan seems guaranteed to turn off potential buyers. More casual users will simply opt for the iPad their friends already have. While more sophisticated, tech savvy users will likely be incensed by both the high price and Verizon’s heavy handed tactic of disabling even WiFi unless a data plan is purchased.

One can only hope that the leaked Best Buy ad is inaccurate or perhaps a trial balloon, and the Xoom will launch with a more sane price point and data plan structure.

Update:

Ars reports that the WiFi only Xoom will be released for $600 and will not require a data contract to enable the networking. So it seems that Motorola is playing to win after all, which is good news for us all!

Update II:

The Xoom gets a pretty good hands on review. But honestly, I still think it’s a bit overpriced. Right now $500 gets you a contract free iPad and a ton of apps available in the Apple App Store versus $800 for the Xoom. While the hardware for the Xoom specs a little higher than the entry level iPad, the apps available tip the balance. And on top of everything else, Adobe Flash Player is not ready for Android 3.0 yet. So I think iPad wins this round.