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Update: It looks like Amazon has drastically lowered the price of the Kindle to $189 in response to this news. Now there’s little reason to consider the $199 Nook — unless you really want that color touchscreen.

Book retailer Barnes & Noble hasn’t forgotten about its Nook e-book reader. The company announced today a cheaper, Wi-Fi only, version of the device for $149. The previous model, which includes both 3G mobile Internet and Wi-Fi support, is now $199 — $60 less than Amazon’s Kindle e-book reader.

The Wi-Fi model offers all of the features as the standard Nook, except of course for 3G connectivity. It has the nooks iconic dual-display setup, which consists of a 6-inch e-Ink display with a 3.5-inch color touchscreen below.

With its most recent software update (version 1.4), all Nooks will have free access to AT&T’s network of Wi-Fi hotspots — in addition to free Wi-Fi in all Barnes & Noble stores. So even though the Nook Wi-Fi lacks true mobile Internet, you’ll at least be able to find a Wi-Fi hotspot in most cities. The update also includes a “Go To page” feature which lets users jump to a specific page, as well as the usual performance improvements.

Both the new Wi-Fi model and the cheaper Nook 3G are available for order from and Best Buy’s website, and will start shipping this week. Barnes & Noble expects the Wi-Fi model to hit a handful of its stores, along with some Best Buy stores, later this month. It will be widely available from both retailers later this summer.

With the Nook dropping in price, it wouldn’t be surprising to see Amazon follow suit with cheaper Kindles this summer as well. It’s less certain that Amazon would attempt a Wi-Fi only unit. Ubiquitous mobile web connectivity was always one of the big selling points for the Kindle. But since the Kindle lacks a color touchscreen (for now), Amazon may be able to bring out a Wi-Fi only model for even less than $149.

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