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The device can read other books - fact. I've bought books on Smashwords and read them on my Kindle. I also got some free books from other third-parties. Read them on my Kindle.
The store may be "Kindle exclusive", but it's not even tied to the device: There are Kindle apps for PC, Mac, iPad, iPod Touch/iPhone, etc. Also I'm pretty sure just about everything you can buy on the Kindle store, you can buy at other e-book stores.
There's no monopoly, no matter how you try to spin it.
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