A Citigroup researcher says Amazon is developing its own cellular phone. Amazon, take heed: It's a tougher business to crack than selling the Kindle Fire.
You're really underestimating the difficulty of establishing a new cellular network.
As for satellites, forget them. They take years to develop and launch, cost tens or hundreds of millions of dollars for the satellite and require obtaining frequencies from the FCC. Satellite communications is difficult to impossible inside buildings and difficult to receive in cities with lots of skyscrapers.
In addition, finding sites for antennas, negotiating with landowners, local governments and consumer groups in the areas can take months and, often, years. Nationwide systems typically cost billions of dollars to create. As a result of all these problems, satellite communications airtime is much more expensive than terrestrial systems.
There's no way Amazon will construct its own cellular system. Amazon could make VoIP a major part of its phone, with service via WiFi, but it wouldn't be a mass market service without a cellular component.
Amazon will partner with one or more cellular operator, as a mobile virtual network operator and/or an agent.
Well, Amazon is basically focused/fixated on three things:
customer service
being the best possible content delivery network
not relying on other companies
It's that last bit that's the rub here. It's difficult for me to imagine that Amazon is going to launch a phone and then have the customers who buy it disappointed with their partner's service. Especially after Apple made the exact same mistake with AT&T and the launch of the first iPhone.
Amazon believes in controlling the consumer experience, start to finish. I agree that it's difficult to speculate as to how exactly they would set up their own network, but, well... how hard could it be? They can afford to launch a satellite. They can afford to set up towers. Maybe it would all work through the Internet, maybe it would work partly through the Internet, maybe they are going to re-invent the way it works.
But I just don't see them partnering with an extant network provider. Or maybe they will, but they will reserve the right to change that partnership, as the Kindle's "whispernet" has involved both AT&T and Sprint. Or maybe they will make run their own service on top of their partners', and change the service provider in a given area dynamically based who is getting the best coverage.
I hope Amazon is more successful with its phone than Sony!
I suspect Amazon doesn't want a niche phone, just as it doesn't want the Kindle Fire to be a niche tablet. The Fire might not generate as huge a volume of sales as the iPad (although we don't know), but it's likely to be a significant slice of the analysts' pie charts describing tablet percentages and sales.
If Amazon comes out with a phone, it will want it to become a big consumer seller.
Amazon is used to operating with low margins, but lots of volume. Indeed, during the new Kindles' introduction, Jeff Bezos said several times that they were "premium products at non-premium prices."
As for Amazon establishing its own cellular network, I don't know. They could become a mobile virtual network operator or work to get all the cellular operators to sell an Amazon phone.
Cellular is a tough business, but Amazon has some options, as I discussed.
I wrote a ThinkerNET blog about the iPad, where I said I was "cautiously optimistic" that it would succeed. Other editors were not so optimistic!
As for a possible Amazon phone, Jeff Bezos is a very smart guy. I wouldn't be surprised if Amazon could figure out a way to successfully sell its own phone or phones.
Hey, if Sony can have its own PlayStation phone to leverage itself as a niche device in a market it has dominated for years, I don't see why Amazon can't do precisely the same thing. Thanks for your thoughts, Alan!
To get the Kindle underway, Amazon took a big hit on licencing fees for a lot of popular novels. I remember there was a quote in a major news story from some guy at Penguin, saying that it was simply impossible for some classic work to be offered for less than $10, because that would mean a loss. But he was wrong; Amazon was taking the loss.
What Amazon wants, and is good at getting, is market share. Once they get enough users hooked, they'll make the money back in ancillary services. And they will presumably be setting up their own cellular network, which will probably have the best reception we've seen yet.
Hi Alam your vblog made me exclaim oh no not another smartphone ! though i dont want to write off the Amazon phone this early (remember how sceptic most of us at IE were when Apple launched iPad) but Amazon will have to be exceptionally good both at the technology and marketing front to beat the already, correct me if i am wrong, saturated smartphone market.
If the Citigroup researcher is correct and the phone would cost Amazon $150 - $170, cellular operators certainly could give it away for free for a two-year contract. However, Amazon would have to be assured the phone would generate sufficient ongoing revenues to justify the free phone.
Amazon also could provide other incentives, such as pay $80 for each of two years for Amazon Prime and get the phone for free. A potential problem with the free videos from Amazon Prime is airtime. So Amazon might have to offer some sort of free or discounted deal, such as pay for Amazon Prime and your first 2GB per month of streaming Amazon content are free.
I'd be interested to see what effect this kind of a phone would have, Alan, on the rest of the cellular market players. We may find some major progress in consumer-friendliness result.
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