October 19, 2016
Stop the presses. A news report out of The Information (hat tip, Engadget) suggests that Amazon is considering the possibility of becoming an Internet service provider in Europe. In theory, the move would give the company a better shot at selling its Amazon Prime Video offering, which it would bundle with Internet access.
However, it doesn't look like Amazon.com Inc. (Nasdaq: AMZN) really wants to get into the guts of network operation. Current speculation has it that Amazon would look to buy up wholesale Internet access and then generate margins as a reseller by promoting its own Internet and retail services.
There is no word on whether Amazon would also consider such a strategy in the US. Plenty of over-builder companies in the States have already taken the wholesale route, and arguably few if any have as much opportunity to generate new revenue and profits from the business model as Amazon would. However, the US broadband market is fractured, which could make piecing together an appealingly-sized footprint somewhat difficult today.
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Amazon has repeatedly tried to steer customers to its Prime services, locking consumers in to its retail ecosystem and making them more likely to spend money with Amazon over time. Just last week, the company launched its own streaming music service, undercutting competitors on price with an $8-per-month fee for Prime members. Consumers can also subscribe to Amazon Music for only $4 per month if they want to access service solely on an Amazon Echo device.
In the US, Google (Nasdaq: GOOG) is the most notable web-born company to try its hand at becoming an ISP. The jury's still out on whether Google will eventually be successful, but the concept of combining underlying transport with higher-margin services riding on top is hardly a new one. In many ways this is what cable operators have always done with traditional TV service. There are, however, potential antitrust issues to consider. The more integration there is between services and the transport networks that deliver them, the harder it becomes for new companies to enter these markets.
Light Reading has asked Amazon for comment on the ISP rumor and will update this story if further information becomes available.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading
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