One more time people keep focusing on the $359 as if Amazon is getting all that mobile broadband for FREE. What I don't like is that iSuppli has been doing this kind of breakdown for iPods for ages, but they missed the mark this time by ignoring the 3G connectivity issue.

Let's try this:

1. The MSRP for an Amazon Kindle is $359.

2. According to iSuppi, it costs $185 to make a Kindle.

3. $359 - 185 = $174. This is all the money that Amazon has to spend to pay for broadband, book distribution servers, programming costs for software updates, etc.

If Amazon is able to get bulk 3G mobile data from Sprint, plus their broadband costs between their servers and the 3G network, plus software updates to the firmware and the manage your kindle website, for $174, then Amazon breaks even.

Now, let's look at broadband. A retail 3G data plan for the iPhone 3G is $30/month. That's $360 per year, one dollar more than what it costs to buy one Kindle 2. I am going to pull a number out of thin air, and say that Sprint sells 3G access to Amazon at 25% of what a consumer pays to AT&T to get data on an iPhone. 25% of $360 is $90.

That means that between the Kindle 2 and the data, Amazon is already spending $185 + $90 = $275 to sell it to you. That doesn't even take into account the cost of hosting the books, broadband between their servers and the 3G entry point, etc.

$275 spent on a device that sells $359 (77% of its retail price) doesn't look that terrible/horrible/outrageous to me.

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