Amazon has stirred up the eBook reader world by reducing the price of a Kindle to as low as $139, the second price drop in a few months.  The international version (which uses 3G GSM) has also been revamped and discounted. The Wall Street Journal estimates that sales have reached around 3.5 to 4 million units to date, comparable to Apple’s iPad 3.3 million units by the end of June. The eBook platform war is livening up!

Heavily subsidised to win early market share

Amazon have done this before, investing heavily in their business model to reap the benefits later. iSuppli estimated that a US Kindle costs around $185 to build, but Amazon said last year that their manufacturing costs were significantly higher despite retailing at $139. (Do these price points sound familiar to those in the femtocell business?)

Once sold, there is of course only one store where you can buy content – a business model similar to popular game machines such as Xbox, Playstation and the Wii. The company said last year that its Kindle manufacturing costs were "significantly higher" than an estimate from iSuppli of $185.49

Connectivity choice

What was interesting for me was the choice between a lower cost Wi-Fi enabled device and a higher priced Wi-Fi + 3G unit. The 3G option seems to be about providing the convenience of being able to buy a book wherever you are – it even works when abroad, and unlike expensive data roaming on normal mobile phones, doesn’t incur a premium. We wrote about 3G connected eBooks last year, contemplating the combination of an eBook with a 3G femtocell.

This is similar to the route taken by Apple with their iPad. You can have a lower cost Wi-Fi only device, or one with both Wi-Fi and 3G.

It even works abroad

For those buying the Kindle DX international version, content can be downloaded in over 100 countries. The terms and conditions are a bit vague, but it seems that there is no premium charge for delivery when buying a book. Accessing private content however could be quite expensive.

Sounds great for going on holiday (although they won't be available here in the UK until the end of August so will miss the holiday season).

What if everyone had a femtocell at home?

For this type of device, 3G data could be the preferred access method if it were available universally and cheaply to all. Many of those likely to buy a Kindle or iPad may also be fairly likely to be interested in a femtocell which would provide this.

Are there lessons for potential femtocell network operators?

• Investing early to capture market share. There are still many countries where network operators can be first to market and maintain differentiation.
• Wi-Fi is being positioned as the low cost, low mobility choice. With many other electronic devices benefitting from wireless internet connections, it could be important to position 3G as the single ubiquitous solution for connectivity. Without stronger support from service providers, Wi-Fi will continue to be the default lower cost preferred option.

Comments (2)

Peter Claydon said:

... Up until now the Kindle has only had a cellular connection. The original Kindle used cdma and the Verizon network. The international versions launched in October 2009 use WCDMA on the AT&T network. The really key thing is that the user has no contract with a mobile operator and does not even have knowledge that a mobile operator is involved. It just works by magic. The international version works using an AT&T roaming agreement, rather than Amazon having individual contracts with operators all over the world. The details of Amazon's deal with AT&T are unclear, but clearly Amazon only gets any money when a user buys content. Users can use the Kindle to access web sites (originally the international version did not allow this), but currently there is no means of Amazon charging the user for this service. As all web sites are filtered through Amazon's own servers, the amount that a user can download while roaming is limited by Amazon anyway, and of course outside the US users are effectively always roaming.

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ThinkFemtocell said:

Amazon Kindle now has several different mobile providers? @Peter: Thanks for the clarification - in particular the point that previous versions were cellular only, using a so-called WhisperNet service that was hidden from the customer, whereas now Wi-Fi is also offered. Under the covers this is Sprint/CDMA in the US and I thought ATT Wireless (and it's roaming partners) elsewhere. The UK version described on the Amazon UK site explains that Vodafone (and it's roaming partners) provide service in 100 countries for these. Several of the big players have setup new divisions to sell wholesale services in this way, called M2M - machine to machine.

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