Kindle e-reader ignites trend toward more wireless devices

Amazon's new e-reader a forerunner to new breed of wireless devices

Even if you never use Amazon.com's new Kindle e-reader to download books wirelessly, the device is the forerunner of a number of limited-purpose wireless devices that are expected to hit the market in the next few years.

Under this new scenario, wireless carriers would provide wireless data connectivity for free or low cost for everything from wristwatches that download the weather forecast to digital cameras that can send images wirelessly, industry analysts said today.

"Even though US$399 is pretty expensive for Kindle, it seems like a forerunner to wireless devices we'll see that aren't a cell phone," said Tole Hart, an analyst at Gartner.

The Kindle, announced yesterday, allows a user to wirelessly download a book for US$9.99, but Amazon does not charge for the wireless connection, which is over Sprint Nextel Corp.'s EV-DO network. Amazon is still paying some wholesale cost for EV-DO connectivity to Sprint, and recouping that cost through the sale of books and newspapers, Hart and other analysts explained.

Amazon, in the case of Kindle, is acting as a Mobile Virtual Network Operator (MVNO) and reselling Sprint's wireless data capability for a specific purpose. Not all MVNO concepts have worked, including one proposed several years ago by the Walt Disney Co., which means there is a certain degree of risk for Sprint.

"The fact that Sprint was willing to negotiate with Amazon shows that Sprint is struggling" and willing to take a risk in hopes of disrupting the normal business model for operators, said Derek Kerton, an analyst at The Kerton Group in San Jose.

Sprint is also backing its Xohm concept to bring wireless broadband via WiMax nationwide next year. The carrier has focused on providing WiMax in all sorts of devices sold by other vendors, instead of the usual carrier practice of selling its own phones and wireless devices for use in its network. In that sense, Xohm is heading in the same direction as EV-DO for Kindle and Amazon, the analysts said.

"The general theme that Sprint talks about with WiMax is to enable all kinds of devices wirelessly, and Qualcomm is thinking this way as well," Hart said.

Philip Marshall, an analyst at Yankee Group Research, and Kerton said that Sprint's work with Amazon might be followed by similar moves by T-Mobile USA, as well as AT&T and Verizon Wireless.

"Kindle sounds like an interesting concept," said Verizon Wireless spokeswoman Nancy Stark. "At Verizon Wireless, we're working on delivering new applications all the time, so stay tuned." The other carriers could not be reached for comment.

In the US, wireless carriers "have a notorious record of controlling devices and service distribution, so we have a way to go before service providers like Verizon are willing to open things for third-party devices [like Kindle] to connect to their network," Marshall said.

Marshall noted that Amazon has latched on to the concept that e-book users will want an easy connection, one where they won't need to set up a subscription with a carrier or do very much to download a single book.

"Amazon is minimizing the complexities for the end user who doesn't have to muck around with a subscription," Marshall said. "I think it could start a trend."

One major reason the concept will catch on, Kerton said, is that a device like Kindle is limited in functionality when compared to a laptop and uses the wireless network only in limited bursts. "We haven't seen that in consumer devices, but with Kindle, the device constrains the data use so that Amazon can go to Sprint and negotiate a deal because they say 'my device is only sipping a little data, mostly text,'" he added.

By comparison, an EV-DO data card for a laptop might cost a user US$60 a month if the user also has a voice contract, Kerton noted.

"I think the Amazon Kindle is the tip of the iceberg, and you'll see a lot of nonphone, nonlaptop devices connected to the networks," he said. For example, Kerton said, imagine a watch that could sell for a set amount and connect wirelessly for weather updates for free or around US$3 a month, or a GPS device that sits on a dashboard that could connect to the Web for traffic and weather alerts.

Kerton said the wireless concept of Kindle is exciting, even though consumers are not likely to favor the e-reader. "I see flop written all over it," he said, referring to Amazon's steep US$399 price for the device and for the relatively high cost for access to a book.

Still, he predicted Amazon could set the stage for many other companies to sell consumer devices and work with wireless carriers for connectivity to them.

Marshall said not only will carriers adapt to more open approaches that allow MVNOs to support consumer products, but that Amazon will do more in that area. "I see them doing more in the mobile arena and going beyond books into social networking and video content and so forth," he said.

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