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Amazon assaults iPad turf with high-end Kindle Fire HD

The new Kindle Fire HD 4G LTE tablet, which will run consumers $499 without a data plan, moves Amazon from the low end of the market onto the iPad's turf.

Now playing: Watch this: Kindle Fire HD might burn the iPad

SANTA MONICA, Calif.-- Perhaps the most unexpected news to come from Amazon's Kindle-fest here today was its announcement of a $499 tablet that runs on the zippy 4G LTE wireless network.

The uber-high end Kindle Fire HD 4G LTE, which also requires a data plan from AT&T that will start at $50 a year, put Amazon squarely into Apple iPad 3 territory. Amazon chief executive Jeff Bezos stood on stage at the Barker Hangar at Santa Monica's local airport, making the case that the most expensive Kindle still beats a comparably loaded iPad by more than $400, when data charges are added in.

It's an interesting move from Amazon, which has succeeded in the tablet market by avoiding direct competition with Apple. When the first Kindles arrived a year ago, Amazon went out of its way to price them well below comparably featured iPads. The rationale was that Amazon would make its money selling books and movies over the device. It's a point Bezos reiterated today.

"We want to make money when people use our devices, not when people buy our devices," Bezos said.

So why push the high-end of the market with a premium device?

"It's been proven that it's a very large market," Dave Limp, vice president of Amazon Kindle, said after the event. "So we're going to give it a shot."

He said that customers were asking for a bigger screen on which to watch movies as well as compose email. So going large was the logical next step. As for the quick wireless modem, Limp acknowledged it was a "leap of faith" that consumers would be willing to pay for that.

The priciest Kindle will clearly have the stiffest competition. That's the iPad's turf.

"We're new. We have a lot to learn," Limp said.

Forrester analyst Sarah Rottman Epps thinks the Kindle Fire HD 4G LTE will find an audience. Amazon has a huge base of customers, and has built plenty of goodwill among them. Lots of those customers will be willing to give the premium Kindle a try.

"It doesn't leapfrog the iPad, but it does bring it to parity," Epps said. "I think some people will prefer the Fire."