Open Networks Could Spark a Gadget Boom

As wireless providers increasingly let outside devices run on their networks, a slew of new Web-enabled electronics could hit the market

by Olga Kharif

Andrew York ordered his Kindle after getting stuck waiting at the Washington Dulles International Airport over Thanksgiving weekend with no books to read. The physics graduate student didn't want to buy another paperback that would collect dust at his already cramped apartment in College Park, Md. And paying for a Wi-Fi connection on top of the cost to download an electronic book to his laptop seemed like a waste of money.

Enter Kindle, a $400 electronic book reader from Amazon (AMZN) that includes a fee-free wireless connection via Sprint Nextel's (S) network. "[Reliable wireless connectivity] is probably the best feature of it," York says. "I already pay $15 a month for wireless Internet for my phone. Having it for free is amazing." He's not alone. The device sold out nationwide in 5½ hours, and it's the best-selling electronic gadget on Amazon—even more popular than Apple's (AAPL) latest iPods.

Spurred in part by Amazon's success with Kindle, a slew of other tech companies, including Sony (SNE) and Qualcomm (QCOM), may be planning forays into the nonphone wireless-device market.

The catalyst: new openness by wireless carriers to having competitors' wares on their networks. Without a green light from mobile-phone service providers such as AT&T (T), Verizon Wireless, and Sprint, selling wireless devices is a nonstarter. Wi-Fi connections are all well and good, but they're typically available in only limited areas, such as cafés, hotels, and airports, typically for a fee. "We wanted Kindle to be hassle-free," says Ian Freed, a vice-president in charge of Kindle at Amazon. "Hassle-free means not having a wireless bill sent to you every month. We didn't want them thinking how to configure Wi-Fi. We wanted a customer to be able to be anywhere, decide you wanted a book—and to download it in under a minute."

Wide Field of Players

That's likely to be possible in more places than Sprint's network. On Nov. 27, Verizon Wireless said it will allow all sorts of devices to run over its network starting in late 2008. Later the company also confirmed it will open its network to all kinds of software, including Google's (BusinessWeek.com, 12/3/07).

AT&T and T-Mobile USA are likely to follow Verizon's lead and open their networks to all devices in the next six to 12 months, says Chris King, an analyst at Stifel Nicolaus. Search giant Google (GOOG) and several other companies, including Frontline Wireless, may bid in a January auction of airwaves, which they, too, could use to create open networks.

Consumers could use open networks not only for handsets and wireless-enabled laptops but also for MP3 players, gaming consoles, and global positioning systems.

The result would be faster growth in some areas of consumer electronics, says Todd Thibodeaux, an analyst at the Consumer Electronics Assn. He believes open networks could add two to three percentage points to growth in some product areas in the next decade. As a whole, the U.S. consumer-electronics market is expected to grow 6.1%, to $170 billion, in 2008. "All these announcements lend themselves to a whole different class of products," he says.