Amazon Smartphone Could Lead to Bigger "Bring Your Own Access" Trend

The news that Amazon is, at long last, going to produce and sell its own branded smartphone, after introducing its own Internet video set-top (the Kindle Fire TV) and Kindle tablets, raises issues about changing boundaries between industries and changing revenue models for at least some leading providers in industries.

The notion that a major and influential software company could support itself on advertising would have been almost completely laughable until Google proved it could be done, at least by one major firm in an industry.

Up to this point, Amazon has been viewed as a dominant retailer, but not as a technology company. With the growth of Amazon Web Services, and its new role as a supplier of tablets, smartphones and Internet video set-tops, as well as a growing role as a provider of online streaming video, that could be changing.

Amazon, in other words, could become the second big technology company to support itself using a non-traditional revenue model, in Amazon's case, retailing.

So far, no major communications service provider has made a similar transition. Many would question whether any major communications service providers ever will do so, though there have been sporadic attempts by smaller entrepreneurial firms to create communications services (not facilities based) whose revenue model is advertising, for example.

Even Google Fiber primarily earns its revenues directly, in the form of subscriber fees for Internet high speed access and video entertainment services.

But it seems possible some specialized forms of communications service might ultimately be created with a partly indirect revenue model, especially forms of access that rely substantially if not completely on untethered access (hotspots, not full mobile connectivity).

Amazon, for example, likely is banking on bigger smartphone-based commerce revenues. From there, it is a big step, but not a far fetched step, to add the actual "access service," though likely an approach emphasizing use of Wi-Fi first, then defaulting ot mobile access if necessary.

How much additional value Amazon could gain, compared to the cost, is debatable. The business case is stronger for others, such as cable operators, who would seek to leverage their fixed instrastructure to create a new "untethered first, mobile fallback" type of service.

That effort likely would be driven by an access fees model, not an indirect model, and gain business advantage largely by reducing the cost of providing the mobile service.


New Street Research estimates that U.S. cable companies could price Wi-Fi-based mobile phone service at a 25 percent discount to existing wireless carriers and still generate profit margins well north of 30 percent by doing so, since so much of the expected access would occur over Wi-Fi.


As much as 60 percent to 80 percent of any user’s Internet application requirements already happens over Wi-Fi, for example.


These days, perhaps only 10 percent to 20 percent of total mobile device usage, for all apps and purposes, actually happens when people are “on the go.” all the rest of the usage is in untethered mode at locations where there is Wi-Fi access.


Wi-Fi access, by definition an untethered but not mobile form of access, accounts for nearly half of all U.S. smartphone Internet access time.

True, the notion that cable operators might become mobile service providers using a Wi-Fi-first model is not as dramatic as Google, a technology company, earning its revenue from advertising, or Amazon, as a technology company, earning its revenue from commerce and transations.

But nobody thought cable TV networks would eventually become full service communication networks, either. Nobody thought mobile networks would become the way nearly every human being got access to voice services.

We might find, in the future, that new tuypes of networks likewise become the foundation for extending Internet access and communication services to underserved or unserved populations in developing regions, as well as providing new competition in developed markets as well.

In the meantime, Amazon's potential entry into the smartphone market is one more step towards "bring your own access" approaches where a user, device or communications provider stitches together a connectivity solution from any available source.

For the moment, any Amazon introduction of its own smartphone, in addition to tablets and Internet set-top boxes, directly underpins the commerce revenue model.

A bigger long-term question is whether a device-centric model based on using "any available access" might eventually prove attractive to Amazon and others, with a branded access offer being a part of that overall approach.



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