From the Wired.com article here.
Looks like Amazon read the Berkeley cloud paper where they spent a lot of time dissecting the economics of physical shipment of cheap disk drives versus the still high cost and relatively constrained (compared to USB, at least) bandwidth of WAN links.
Never underestimate the simplicity and potential data transfer rates of sneakernet. I was reminded of this when I saw the Western Digital WDTV recently at Costco. It’s basically a digital media player with HDMI that you plug portable USB drives into. At first I thought it was dumb, but the more I thought about it, the more I realized that this is a pretty pragmatic solution. what they did right was keeping the price way down (they are something like $129 CAD at Costco). I’m trying to talk myself out of buying this and waiting for the inevitable cheap version with USB and Wifi plus the ability to wirelessly mount disks from various servers.
K. Scott Morrison's Blog 