Telecom Industry About to be Amazoned

Question: What happens to any market Amazon enters? Answer: public market valuations drop; market share shifts (or at least people expect that to happen with time).

Rhetorical question: What happens when Amazon enters the telecom business? And it will. Amazon is moving to commercialize its own fleet of nearly 4,000 low earth orbit satellites, to provide internet access to literally every square inch of the earth’s surface.

Amazon wants to be an ISP for the same reason Google and Facebook do, with one major difference: the revenue model. As any ad-supported app provider’s success hinges on the total number of people able to use the apps, so any commerce supplier’s fortunes rest on the number of consumers it can establish direct or indirect relationships with.

And Amazon believes it will do better when more connections can be made directly, without relying on the goodwill of governments or other private firms.

“Four billion new customers” is a big enough carrot to justify launching a constellation of nearly 4,000 low earth orbit satellites, making Amazon one of the world’s potentially biggest internet service provider firms.

It is easy to predict what the implications are for others in the connectivity services ecosystem.

The "Amazon effect" refers to the impact created by the online, e-commerce or digital marketplace on the traditional brick and mortar business model due to the change in shopping patterns, customer expectations and a new competitive landscape. https://www.investopedia.com/terms/a/amazon-effect.asp

Some note that Amazon’s business activities prevent inflation. That’s another way of saying prices cannot rise much.  

source: Conversable Economist

Surveys tend to show that contestants in any business believe entry by Amazon into their own markets affects gross revenue, profit margins and distribution channels.

source: Real Results Marketing

To be sure, margin pressure already is a huge issue in the global telecom business for other reasons (competition, changes in end user demand). Amason’s entry into one or more parts of the connectivity value chain will only worsen those pressures.

The big observation is that the telecom industry is about to be “Amazoned.”