Amazon Kindle's Switch To AT&T Network A Blow To Sprint
09 October 2009 - 7:14AM
Dow Jones News
Amazon.com Inc.'s (AMZN) decision to switch to AT&T Inc. (T)
as the wireless provider for its newest Kindle is a blow to Sprint
Nextel Corp. (S), which could be left as a jilted partner for
future e-reader models.
The Kindle has long been Sprint's high-profile model for its
connected devices business, which provides wireless service to
products that aren't phones.
While revenue from the deal wasn't significant, Sprint Chief
Executive Dan Hesse would often point to it in his claim that the
carrier was a leader in the area. But the company's larger rivals
have been pushing hard to establish their own foothold in the
business, signing buzz-worthy partnerships of their own.
On Wednesday, Amazon.com unveiled a new Kindle with
international access, which uses a global standard called GSM that
is powered by AT&T. The online retailer also cut the price of
its older Kindle - which uses Sprint's service - by $40 to $259.
Existing Kindles will continue to use Sprint's service, but it's
unclear what their relationship will be like for future
devices.
AT&T has a "long-term strategic agreement" to power the
Kindle, according to Glenn Lurie, head of the company's emerging
devices business.
Sprint continues to have "strategic discussions on an ongoing
basis" with Amazon.com, said Danny Bowman, who similarly oversees
Sprint's connected devices business.
Amazon.com declined to comment on its future Kindle plans.
The expansion to global access is a natural move by Amazon.com
because Kindle users are typically more sophisticated and are more
likely to travel overseas. As the user base has grown, so have the
demands on the e-reader. Amazon.com's decision to use AT&T and
its broader access to the international network underscores the
domestic limitation of Sprint.
"Device manufacturers are certainly increasingly conscious of
maximizing their addressable market," said Daniel Hays, telecom
analyst at the consulting firm PRTM. "As such, most of them are
trying to go with network technologies that are most widely
utilized."
The opportunity to connect multiple devices - from digital
cameras to residential power meters - is a hot topic at the CTIA
wireless industry trade show. Ahead of the show, which began
Wednesday, Sprint said it had created a unit focused on the area. A
few months ago, Verizon Wireless - jointly owned by Verizon
Communications Inc. (VZ) and Vodafone Group Plc (VOD) - formed a
joint venture with Qualcomm Inc. (QCOM) to foster the development
of connected devices.
The market is still in its infancy, so there remains for the
players to each grow. But Kindle's decision to switch underscores
the increasing competition in the area.
"Are we going to bump into each other? Of course we are," Lurie
said.
In many cases, global access may be an advantage that AT&T
has over Sprint, as well as Verizon Wireless, which uses the same
network technology as Sprint.
"Many [original equipment manufacturers] will want to bet on a
device that works around the world," Lurie said.
Sprint, however, has lower operating costs, and does have an
opportunity to target low-cost devices that don't need to go
overseas. Earlier Thursday, the company said it would begin
offering a service that would allow businesses such as cable
providers or smaller traditional telephone companies to more easily
run a wireless resale business under their own brands.
The company said the offering, in which Sprint would handle many
of the back office tasks that have plagued resellers in the past,
would remove the historical barriers to entry to the wireless
business.
Bowman acknowledged that Sprint's rivals had done a better job
in recent months of touting their flashy partnerships. He predicted
the company would have a number of "exciting" partnerships of its
own to announce in the coming months.
"It's about doing a better job of getting our name out," he
said.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com