Shubham Sawarkar
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In a recent report from Bloomberg, it has been revealed that Amazon is currently engaged in discussions with major wireless carriers in the United States, including Verizon, T-Mobile, Dish Network, and AT&T, to potentially provide low-cost or even free nationwide mobile phone service exclusively to its Prime subscribers. This strategic move aims to enhance customer loyalty and deter subscribers from canceling and rejoining the Prime membership at their convenience. Although Amazon spokesperson Bradley Mattinger denied these claims, the impact of such a venture has already made waves in the market, causing share prices of Verizon, AT&T, and T-Mobile to decline.
By offering wireless plans at an incredibly affordable $10 per month or potentially free, Amazon seeks to solidify long-term loyalty among its Prime subscribers. The current flexibility of canceling and rejoining the Prime membership may lead to an inconsistent customer base. However, if mobile service were to be bundled into the Prime subscription, customers would be more inclined to remain loyal, thereby increasing the overall retention rate.
According to sources close to the matter, discussions between Amazon and the wireless carriers have been ongoing for approximately two months. However, it remains uncertain whether Amazon will proceed with the plan or abandon it altogether. The launch of such a service could potentially take several months, as various factors need to be considered and negotiated. Amazon has a history of exploring new ventures and innovating within the wireless industry, making this potential expansion into mobile services an exciting prospect.
These wireless carriers face a potential dilemma, as they have already invested significant capital into developing their 5G networks. Collaborating with Amazon could provide an opportunity to generate a return on their investments. Ultimately, it would be in their best interest to consider the possibilities, given Amazon’s immense customer base and potential market disruption.
Amazon’s Prime membership has faced challenges due to increased competition, particularly from Walmart’s Walmart+ membership, which offers similar fast delivery perks at a lower annual cost of $98. Moreover, Walmart+ includes a subscription to Paramount+, directly competing with Amazon’s Prime Video. To adapt to changing circumstances, Amazon has recently implemented delivery fees for Fresh grocery orders under $150, deviating from their previous practice of free deliveries for orders over $35. These adjustments highlight Amazon’s need to stay competitive and continue offering value to its subscribers.
While Amazon would need to compensate wireless carriers for network usage, these carriers face the risk of losing customers to Amazon’s potential low-cost or free mobile service. However, Bloomberg notes that declining Amazon’s offer may not be a viable option for carriers, considering their substantial investments in 5G infrastructure. Exploring new avenues for sales outlets would enable them to recoup some returns on their significant investments.
This potential venture is not Amazon’s first exploration into the wireless industry. The company has plans to initiate testing for its satellite-internet service, Project Kuiper, in the coming year. Moreover, in 2014, Amazon released the Fire Phone, priced at $199. However, due to lackluster sales and market reception, the Fire Phone was discontinued after approximately one year. Nevertheless, these past experiences have likely provided Amazon with valuable insights and lessons that will inform its approach to the mobile service offering.
Google has already established a presence in the wireless industry with its wireless network called Google Fi Wireless. Operating as a mobile virtual network operator (MVNO), Google Fi Wireless utilizes T-Mobile’s network infrastructure. With its established network and experience in the industry, Google’s presence in the mobile service market may serve as a potential benchmark for Amazon as it explores its own entry.
