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Back in June, when Microsoft announced plans for its Surface tablet, the company said the pricing for the initial model, the Surface RT, would be “competitive with a comparable ARM tablet.” At the time, that was a thinly veiled reference to the iPad, but thanks to Amazon’s new Kindle Fire HD lineup, the comparison just became more complex.

Amazon’s new tablet, unveiled yesterday, will start at $199 for a 7-inch version. The Kindle Fire HD with an 8.9-inch screen will run $299, and one with an 8.9-inch screen and 4G LTE wireless will go for $499.

Microsoft hasn’t yet announced pricing for the Surface. In a research note this morning, Shaw Wu, an analyst with the firm Sterne Agee, says the new Kindle Fire lineup changes the context for Microsoft’s pricing, whatever it turns out to be.

He writes, “We believe the pressure for MSFT to price its Surface tablet aggressively is now greater than ever. Initial press reports indicated a price point of $599, a premium to the new iPad, but we now believe it will likely need to price at $299 or lower to give it a fighting chance.”

In many ways, the Kindle Fire HD and Microsoft Surface are very different. For one, the Surface is is considerably larger, with a 10.6-inch display. The Microsoft device’s keyboard cover accessory is another differentiator.

In addition, the Kindle Fire HD will be ad-supported, with sponsored screensavers (shown at right) and an ad in the corner of the home screen.

On the other hand, the 4G option for the $499 Kindle Fire HD gives it an edge over the Microsoft Surface, which is expected to come with WiFi only to start.

Bottom line, many people will be choosing among a Kindle Fire HD, a Microsoft Surface RT, a Google Nexus 7 and an Apple iPad when it comes to their next (or first) tablet. And when it comes to pricing, Amazon just set a new bar, and it’s low.

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