Will Amazon Kindle a better MVNO model?

amazon_kindle.jpgThe Mobile Virtual Network Operator (MVNO) business in the U.S. is hardly making any headlines these days. That’s because some of the biggest MVNO’s have lately kicked the bucket. First, there was Amp’d Mobile where the management engineered a spectacular demise by burning cash and providing service to those who didn’t pay (a cellular sub-prime gamble of sorts). Then there is ESPN Mobile, which bit the dust after several agonizing months of trying to sell a high priced sports-oriented offer that not even loyal fans would bite. These are just two examples that sealed the fate (see related article on Why U.S. MVNO’s will find it hard to survive) of the traditional MVNO model. However, all hope is not lost. The MVNO business can still be successful – for the right innovator.

In steps Amazon into the picture. Amazon has shown time and again that they can come up with a feasible business model or two that users find compelling and easy to use. For example, Amazon revolutionized selling books online and then made is super easy with features such as 1-click checkout. Then there’s that elastic computing cloud, which I think has a lot of potential.

And now, Amazon has come up with its next innovation – an electronic book reader called Kindle that sells for $399 and makes it easy to read and easy to download e-books anywhere, anytime. Kindle can view, select, purchase, and download electronic books over a high-speed cellular network. Users can also purchase a newspaper or subscribe to daily newspapers, magazines, and blogs for a monthly fee. Newspapers are delivered overnight and blogs are updated several times a day.

Amazon isn’t the first to sell an electronic book reader, but its the first to have an electronic book with the following features:

  1. Easy-on-the-eyes E-Ink. The Kindle, like the Sony Reader, has an electrophoretic display from E-Ink that is designed to look like paper. An LCD screen, a popular choice for e-readers and smartphones, causes more eyestrain.
  2. Download e-books anytime, anywhere using a wireless broadband speeds (no need to look for a hotspot)
  3. No need for a wireless subscription (no contracts, no bills, no worries)

What’s interesting here is that there is no wireless/cellular subscription required. Imagine a wireless device that can connect to a high speed cellular network but doesn’t need a subscription? This is just what Amazon has done and perhaps may have opened up a whole new use for mobile data networks. This contrasts in many ways with the iPhone, which requires a cellular contract, a subscription to cellular Broadband service called EDGE, but doesn’t even allow wireless downloading of songs (except via WiFi hot-spots).

The Kindle operates on Sprint Nextel’s 3G cellular network. But user will not see a bill for wireless service – it’s included in the price of the content. The Kindle is “always-on”, that is always connected to Sprint’s 3G EV-DO network (slides down to the slower 1x network when EV-DO is not available). Interestingly, since Sprint EV-DO network was recently upgraded to Rev A, where users typically get download speeds of about 800 Kbytes, e-books should download quickly. My guess is that the device will not roaming on other networks. Users can also turn the radio off, which will come in handy in airplanes, and will extend the battery life from about two days to one week.

Users can also “sideload” purchased e-books onto the Kindle. In any case, every book purchased is backed up on Amazon along with any bookmarks or notes added by the user. I know that sometimes devices can go bad, so this is one of the most important features for me. I’ve always wanted the backup feature with iTunes, but I guess Apple sees things very differently, and they also have to grapple with a messed up Digital Rights Management (DRM) system.

E-books cost about $9.99, while newspaper subscriptions start at $5.99 per month. There is a small music player on the device for background music while reading, but Amazon isn’t selling music over EV-DO, so users will have to sideload their own songs. This is not a great choice (perhaps it will be added later), because Verizon Wireless claims that 95% of song downloads from its VCAST music service is over-the-air (and its priced higher than for sideloading)

I think Amazon has another great idea with Kindle. It has already sold out in the first 5.5 hours. This is going to be another great product and a good boost for Wireless Broadband services.