Ever since Apple released the first iPhone in 2007, e-book professionals have speculated about whether the phone's innovative full-color screen technology, wireless access and multimedia functionality was actually setting new standards for digital reading devices. After the release of the new 3G iPhone earlier this month, at least one e-book retailer believes there's no longer anything to speculate about.

“When it comes to digital reading devices, the iPhone blows everything else away,” said Scott Pendergast, cofounder along with his brother Stephen of Fictionwise.com, a digital book retailer and e-book technology developer. Although Apple has been largely silent on the iPhone's e-book capabilities, it opened its new 3G iPhone to third-party software developers, which allowed Fictionwise to adapt its eReader software—digital reading technology Fictionwise acquired at the beginning of 2008—into an e-book reader suitable for both the iPhone and the iPod Touch, a similar nonphone Apple device offering all the rest of the iPhone's multimedia capabilities. One of the largest e-book retailers on the Web since its launch in 2000, Fictionwise offers encrypted frontlist titles from major book publishers as well as DRM-free indie and public-domain titles in every e-book format available.

The day the new iPhone was released, Stephen Pendergast said, Fictionwise was swamped with downloads of its new eReader as well as requests for Fictionwise memberships—more than 7,000 memberships in one day—and has sold thousands of titles each day since. The eReader is downloadable for free through eReader.com and via the new iPhone App Store and allows iPhone owners to buy, read and store branded, encrypted e-book content on their devices. While there is other software available for reading e-books on the iPhone, those readers are limited to public domain e-books .

While the initial eReader 1.0 (there's a YouTube video showing how it works) does not have full iPhone functionality, Pendergast said upgrades will give the reader full functionality by the fall, including the ability to browse and purchase e-books from sites other than Fictionwise.com. “We wanted to have a solid reading system for the iPhone ready on day one. Now we're going to build on it.”

Scott Pendergast also said that, overall, Fictionwise's e-book business is posting solid gains, with sales in the first half of 2008 up 40%. The company is working on a version of the eReader for the Blackberry, and since last December Kindle owners have been able to register their devices at Fictionwise and buy titles in the Kindle format.

James Kendrick, founder of the mobile technology blog, JK On the Run, said he only buys e-books (“no paper books”) and has high praise for both eReader and the iPhone. “I didn't buy the first iPhone because you couldn't use eReader on it,” he said. “The new iPhone is just like reading a little book.”

Sara Nelson is away; her column will return next week.