I mentioned in a blog last week that there is a rumor that Amazon is considering becoming an ISP. This information came from The Information, which says it got this by somebody inside Amazon management.
It’s an intriguing idea. Amazon has shown throughout its history that it loves to own its supply chain. If you recall, Amazon started out as a web reseller of books. But over time the company has built what must certainly be the largest and most efficient bricks and mortar fulfillment infrastructure in the world.
And the company hasn’t stopped there. The company has been building a fleet of semi-trailers used to haul its inventory, thus bypassing UPS and the Post Office. The company uses third-party tractors today but their goal is to build a fleet in anticipation of self-driving trucks within the coming decade. The company is also experimenting with drones, wheeled robots and other ways to bypass local delivery services.
The company has done the same with its successful data center business. They have built massive data centers and assembled a dark-fiber network to connect them together and to connect to major customers. And it is that fiber network that could create the backbone of an ISP network.
You have to think that Amazon learned a lesson from Google Fiber’s foray into FTTP, and so it seems unlikely that they would leap into a massive infrastructure build in that same mold. The article says Amazon might consider using the open access networks in Europe as a way to avoid building fiber. But they don’t have to go the whole way to Europe to try this. For example, just across the mountains from Seattle are a number of Public Utility Districts (county-wide municipal electric companies) that have built open access fiber networks that pass over 100,000 homes – an easy way for Amazon to test the ISP idea.
And around the country are a number of other open access networks. All of the municipal networks in states like Colorado, Utah and Virginia are required by law to be open access. We have the example of Huntsville, AL that built a FTTP network for Google that will become open access after a few years. There are numerous communities around the country that would gladly build fiber networks if they were guaranteed to get companies like Amazon and Google as major ISP tenants. It’s been my experience that almost no city wants to be an ISP unless it has no other option – but there are many who want fiber badly and would welcome Amazon with open arms.
I would think that Amazon will also keep their eye on the developments with wireless last mile. There might come a time when they might be able to leap into the ISP business with a reasonable cost per customer – at least in selected markets.
Amazon would be an interesting ISP. It was just a few years ago that it was clear that an ISP needed a traditional cable TV product to be successful. Google tried to launch without cable TV in Kansas City and hit a brick wall in selling to residential customers. But the tide is turning and I’m not sure that TV is mandatory any longer.
Amazon already has an impressive content platform with Amazon Prime and they have said that they are going to spend billions to create their own content, following the lead of Netflix. It’s also becoming clear that customers are becoming willing to accept an abbreviated line-up of popular cable channels like what’s being sold by Sling TV and other OTT providers. Amazon could be competitive with an abbreviated cable line-up made up of local programming, popular cable channels and its own content.
But Amazon has some advantages that other ISPs don’t have. For now Amazon is leading the pack in the intelligent personal assistant market with its Amazon Echo. I’ve had an Echo for about six months and I already can tell that it is improving. The company is working towards introducing cloud-based AI to the platform and within a few years the Alexa assistant should become a true computer assistant like has been envisioned for decades in science fiction.
My gut tells me that bundles which focus on smart computer services like Alexa will soon be more popular than the traditional triple-play bundles from Comcast and AT&T. Amazon has one huge advantage as a start-up ISP in that customers like using them – something they have fostered by delivering packages regularly on time to a huge percentage of households in the country. They are at the opposite end of the customer service scale from Comcast and the other big ISPs.
I have no idea if this rumor is true. But the idea is so intriguing that I hope Amazon is considering it. One of the major complaints about broadband in this country is the lack of competition and choice. Companies like Amazon can bring fresh competitive bundles that break away from the traditional triple play and that can redefine the ISP of the future.
Update: This rumor persisted and in February 2017 I posted an update about this rumor. https://potsandpansbyccg.com/2017/02/21/amazon-as-an-isp-2/