Could iPhone smoke the Kindle?

I wanted a Kindle. I was ready to buy a Kindle. The iPhone spoiled everything.

I'm an avid reader of digital books and for months I had my eye on the Kindle, the digital reader from Amazon, with its high-contrast screen and PC-less book downloads. Then Apple announced that the iPhone 3G goes on sale July 11.

I'm now in second-guess hell.

I know Apple has said nothing about offering an e-reading application for the new iPhone. But what happens if Steve Jobs later surprises us or some developer turns the iPhone into a whiz-bang electronic reader? I'll tell you what happens, my Kindle ends up on eBay.

I can imagine a slick iTunes bookstore, stocked full of titles that are easy to buy and download--sort of like Amazon.com. Even if Apple decides against getting into book sales, the upgraded iPhone will be open to developers. I'm betting one has already written an e-reader application.

There's a huge opportunity here for some enterprising developer. The person could write a reader application for the iPhone and then sign licensing deals with top publishers. The developer could sell digital books out of their own Web store. The pitch to the publishers would be: "I have the best way for you to get on the iPhone."

Of course, if Apple, which possesses complete control over the iPhone application development program, is planning something similar down the line, then a third-party e-reader application might not pass. Last January, Jobs voiced skepticism about e-readers, telling The New York Times that people "don't read anymore."

This to some is a good indication that he's interested.

Regardless, all of this highlights the main problem with the Kindle: it's too much of a specialty device to appeal to a mass market audience. People want more value than the Kindle offers.

Sure, Amazon's e-reader is probably going to outperform the iPhone when it comes to providing a better reading experience. The Kindle features a 6-inch screen and E Ink technology, which is easier on the eyes than backlit displays. But the iPhone has all it needs to become a great digital-book reader: a 3.5-inch (diagonal) widescreen Multi-Touch display and 480-by-320 resolution.

I've read close to 20 books on my Palm Pilot TX and its 3.8-inch screen is plenty big enough.

Certainly, the Kindle's advantages as an e-reader aren't enough to trump the host of iPhone features: a phone on a new faster network, camera, video player, it holds photos, contacts, you can play games and there's the apps we don't know about yet. With the Kindle I get Web browsing and e-mail.

When you size up bang for the buck, it's all iPhone. The 16GB iPhone 3G costs $299. Of course that doesn't include network charges. The Kindle sells for $365 and that includes free wireless.

Brett Arends at The Wall Street Journal argues that if you read a lot, the Kindle can help you save money because e-books are cheaper than the paper kind. But he acknowledges that you have to buy 61 books before the device pays for itself.

Pacific Crest analyst Steve Weinstein predicts that global e-book sales at Amazon could reach $2.5 billion by 2012. If he's right, I'm thinking many of those sales won't be for the Kindle.

CNET News.com's Declan McCullagh and Tom Krazit contributed to this report.