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Personally I think all they need to do is leverage some of their existing services like amazon s3. That way storage becomes irrelevant in context of the device itself. Also doing so would provide tolerance against things such as losing your device or storage itself becoming damaged somehow.
Failing that a nice plan b would be to provide a service that lets you essentially do what I already did out of the box. No real reason to have any storage on the device itself when it has 3g cell service which gives you coverage pretty much anywhere. Perhaps add wifi in the k3 to cover the areas where the cell coverage wont extend.
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