Rumor has it that Amazon AMZN is considering getting back into the wireless business as a reseller. TD Ameritrade Network invited me to share my thoughts with their viewers on the impact this would have — hint: It would have major implications! — on the wireless industry, assuming it actually happens.
I’ll start by pointing out that this would not be Amazon’s first such effort. In 2014 several companies took the plunge and launched their own smartphones, including Amazon (anyone remember the Fire Phone?), Facebook META , Xfinity Mobile GOOG and others.
That round of efforts was a flop. None succeeded and they pulled the plug within a few short months.
The wireless industry today is very different. Many players have re-entered the space. In fact, resellers like the companies’ mentioned above are winning business at a fast rate.
Part of the reason they’re successful this time is that they charge less than traditional wireless networks. In today’s weak economy, people are looking to cut costs.
So this could indeed be the right time for Amazon to get back into wireless. To be sure, many questions remain open. But the answer to at least one of them is pretty clear: Whatever the details, an Amazon wireless launch would be far more successful this time around.
The company is said to be considering charging just $10 per month — or even offering free service — with limitations — to some Prime users.
This will help Amazon further lock in Prime customers.
It’s all about the sticky bundle. And it’s the same strategy the cable television competitors are using with wireless. They don’t think of wireless as a profit center.
Cable TV sees wireless as a loss leader, an additional service that helps with new customer acquisition, or in this case, retention.
Bundling works! And in this weak economy, Amazon may want to get ahead of potential Prime member cancellations or a falloff in new signups.
So how would an Amazon entry impact the current wireless marketplace?
Today, the wireless industry looks much different than it did a decade ago. Many resellers offer low-priced services, including options that limit data or international usage.
Users can already get wireless service from resellers at prices as low as $20 – $30 per month. If Amazon prices their service significantly lower than this, it could put significant pressure on the existing competitive field, including both other resellers and primary providers.
A low-cost entry by Amazon could cause other players to further reduce their pricing to remain competitive. While such pricing pressure has been in the mix for several years already, Amazon could accelerate it.
The ripple effect of a potential Amazon return to wireless is already making its way through the marketplace, as investors adjust positions and operators brace for impact.