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Analysis: Amazon e-book's wireless revolution

Kindle ignites trend toward more wireless devices

As reported earlier this week, Amazon has finally released its long-anticipated Kindle e-book reader - Amazon's first foray into making its own hardware. The device weighs 10.3 ounces, can contain up to 200 books, has a keyboard, and uses electronic ink display technology.

But even if you never use Amazon'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.

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Exclusive: Hands-on with Amazon's Kindle e-book

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, according to industry analysts.

"Even though $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 on Monday, allows a user to wirelessly download a book for $9.99 (£5), but Amazon does not charge for the wireless connection, which is over Sprint Nextel's EV-DO network in the US. 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.

Sprint is also backing its Xohm concept to bring wireless broadband via WiMax across the US 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, 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.


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