how can a company differentiate its tablet from all other devices in the market and be a credible challenger to iPad?” I don't think there is a conclusive answer. However, based on the emerging evidence I think the combination of an attractive device price and the availability of compelling OTT video services could be key differentiators.
Based on the above two factors, a good example of a well-differentiated tablet is the Kindle Fire. Many observers have noted that Amazon has hit a home run on price with the Kindle Fire. Based on tablet usage data I have looked at over the last few weeks I think for any tablet vying to be a credible player should have an excellent OTT video service with superior user experience. The current market leader Apple's iPad is definitely well positioned with numerous OTT video services available on it.
OTT video service in-house. In my opinion, the best option for tablet makers is to partner with cable or IPTV providers and leverage a managed service provider to enable an out-of-the-box OTT video service for end users. An experienced and proven managed video service vendor will be able to run the service at a much lower cost compared to in-house operations given the economies of scale.
The partner can leverage their existing relations with media companies to get favorable content rights (often a sticky and stumbling block). Similarly the managed service provider will bring security and device integration expertise needed to reduce the time to market. In addition, a managed service provider with mobile experience will be able to improve the user experience by enabling a consistently high quality experience across different screen sizes, network bandwidth limits and network types.
In short tablet makers who want to succeed in this highly-competitive product category must launch devices with compelling video services right out-of-the-box. In most cases, the cost effective and efficient way to do this is to use a managed service provider. This is because competent managed service providers bring the following advantages: almost no CAPEX cost, low OPEX cost, existing content integration, and ability to provide high video QOS across variable screen and network conditions to end-users.