How Verizon could succeed in the eBook business

Verizon Wireless executive Tony Lewis told Reuters this week that he expected competitors to the Amazon Kindle eBook reader to "arrive" in 2009, and hinted that Verizon would sell them to customers in the same way they sell cell phones -- bundled with wireless data plans.

At first, the idea of Verizon selling Kindle competitors sounds insane. Their business plan would presumably involve charging customers connection fees for accessing an online electronic bookstore. This sounds crazy for two reasons: 

1. It's not very competitive to charge for bandwidth when Amazon.com gives it away for free. It would be as if a brand-new software company decided to develop a new Web browser to compete with IE, Firefox and Chrome, but to charge $99 for the software when everyone else is giving it away. 

2. Who owns the online bookstore? Verizon? If so, the whole thing will fail. Nobody wants to buy books from a cell phone carrier. They already gouge us for SMS messaging, which costs them nothing. They charge through the nose for ringtones, cheesy "games" and wallpaper, all of which should be free to customers. Now they want to stick it to us for eBooks? No thanks.

But these are just presumptions. If Verizon plays their cards right, they could really build a great business here. 

First and foremost, they need to make sure they're partnering with superior vendors. It's likely that Sony will come out with a mobile broadband version of their Sony Reader products. Maybe other companies will surprise the industry with new devices. The important thing is that it's superior to the Kindle.

Second, Verizon should make bandwidth potentially free. What I mean is that, like talk time or data plans, the eBook connectivity should be free within existing plans unless some high usage metric is exceeded. 

Third, it should support Wi-Fi gracefully. Most people use these things in their own homes, in coffee joints and in other places where Wi-Fi is available. And it appears that Amazon.com is working on a Wi-Fi Kindle.

Fourth, they should focus on bundling deals. Let's say the MSRP on the reader is $300. They should bundle that at a steep discount with a phone and require a 2-year contract. In other words, they can use the eBook reader as a lure into the lucrative contract. 

Fifth, partner with Amazon.com. People like buying books from Amazon.com, and it's likely the whole Kindle project has everything to do with Amazon wanting to own the future of electronic books sales and nothing to do with a desire to go into the consumer electronics business. Here's where carriers like Verizon can really benefit from the micropayments model. A deal with Amazon should include Verizon getting a piece of every book sale. 

Verizon is the first US carrier to hint about going into the eBook business. AT&T is probably intending to do so as well. If carriers act like their old selves and look at ever new potential business as a new way to scam and shake-down existing customers, they will fail. But if they grow a brain and do the right thing -- only charge where charging makes sense -- they could succeed.