It was a shift that changed the technological world. It’s been analyzed, written about, and even adapted into a recent film (which was pretty great, I might add).
First, the Blackberry came along and changed handheld computing forever. And then Steve Jobs gave one speech in 2007 that led to the demise of the company that once possessed 45% of the smartphone market. Founded in 1984, Blackberry released its first phone in 1999. With 85 million users, Research In Motion (Blackberry’s creator) peaked in 2013. By 2016, that number was down to 23 million.
The full reason, of course, was more than the speech. We all know that. Sure, the phone was amazing. It was coveted; back then AT&T was the aspirational carrier because only it could serve you an iPhone on a silver platter. The deal that Apple struck with then-Cingular Wireless funded its own investment into its wireless data infrastructure. I would posit that it was the reformatting of carrier economics that determined the next 15 years of computing. Jackie McNish, author of Losing The Signal: The Extraordinary Rise and Spectacular Fall of Blackberry wrote:
If the rise and fall of BlackBerry teaches us anything it is that the race for innovation has no finish line, and that winners and losers can change places in an instant.
The recent reports of Amazon exploring the possibility of offering a wireless plan for Amazon Prime subscribers have sparked significant interest and speculation. There are several reasons why Amazon would pursue such a deal, drawing parallels to Apple’s strategy with Cingular to outmaneuver the market leader in 2007. On January 10, 2007, one day after the fateful speech, the New York Times explored the deal and its merits:
They considered an Apple-branded mobile phone service that would piggyback on the Cingular network, but rejected the idea. Then, a year ago, they settled on the final concept, an Apple-made phone for subscribers of Cingular, which is owned by AT&T.
In that spirit, this essay examines the potential implications for Amazon Prime and the broader data and hardware industries.
Rationale behind Amazon’s Wireless Idea
Let’s dive right into the why. Here’s what Amazon wants to do.
Enhance Prime Membership: Amazon’s primary objective is to bolster loyalty among its Amazon Prime subscribers, who are its most valuable customers. By offering a wireless service as an additional benefit, Amazon seeks to increase the value proposition of Prime membership and reinforce customer retention. In shades of Apple’s original deal with Cingular, Bloomberg reports lead one to believe that Amazon would be welcomed with opened arms.
The carriers aren’t really in a position to say no to Amazon. Having poured billions of dollars into super-fast, high capacity 5G wireless networks, the mobile operators have
Gain a strategic competitive advantage: With the emergence of Walmart+ as a lower-cost alternative to Prime, Amazon faces intensified competition. A wireless service offering could serve as a differentiating factor, positioning Amazon ahead of its competitors and attracting new customers.
Leverage existing infrastructure: Amazon has a vast infrastructure through its AWS division, which provides cloud computing services. By collaborating with wireless carriers, Amazon can leverage this infrastructure, minimizing the need for costly network development and accelerating its entry into the wireless market.
Comparing This to Apple’s Strategy with AT&T
To draw a parallel between Amazon’s potential wireless venture and Apple’s partnership with AT&T, we need to examine Apple’s early dealings and its resulting impact on the market.
Apple’s approach was a departure from the prevailing smartphone strategy dominated by Blackberry. While Blackberry focused on providing a secure and efficient platform for email and messaging, Apple envisioned a device that could seamlessly integrate multiple functions and deliver an unparalleled user experience. Key factors that contributed to Apple’s success were four-fold.
The iPhone introduced a revolutionary touch-based interface with a large, vibrant display and intuitive gestures, replacing the physical keyboards and stylus-based systems common at the time. This simplified and enhanced the user experience. Apple also introduced the App Store, a platform that allowed third-party developers to create and distribute applications for the iPhone. This vast ecosystem of apps expanded the capabilities of the device, attracting both developers and users.
Unlike Blackberry, which primarily focused on productivity features, Apple emphasized multimedia capabilities. The iPhone offered an integrated iPod for music playback, a robust web browser, and a high-quality camera, appealing to a broader consumer base. And Apple’s iconic design, sleek form factor, and cohesive branding contributed to the iPhone’s desirability.
Apple’s innovative approach disrupted the market, capturing the attention of consumers who sought a more versatile and engaging smartphone experience, as well as a more stylish and premium device. Blackberry, caught off guard by the iPhone’s success, struggled to adapt quickly, leading to a decline in market share and eventual loss of its leadership position.
Apple’s exclusive agreement with what is now AT&T was a strategic move that enabled it to focus on a single carrier and create a seamless user experience. This approach allowed Apple to negotiate favorable terms and collaborate closely with AT&T to invest in digital data infrastructure, supporting the iPhone’s success. Remember, there were critics who suggested that this partnership was ill-advised:
Iain Gillott, analyst with IGR, speculates that users will get frustrated with the slower EDGE network particularly since some of the new smartphones operate over higher-speed networks such as HSDPA or 1xEV-DO. “It makes no sense to me,” Gillott says. While the iPhone boasts Web surfing, Yahoo email and other slick-looking applications, an EDGE network connection – with average speeds ranging from 80 kbps to 110 kbps – is not appropriate support for what is supposed to be a game-changing handset.
Apple’s subsidization strategy helped to broaden its user base and provide new revenue via the monthly payments for hardware. But more importantly, it helped AT&T raise the capital required to improve upon its Edge Network.
If Amazon were to follow a similar path, it could choose to acquire a wireless carrier or invest in its own infrastructure. This would grant Amazon greater control over the network and allow for tailored services, aligning with its customer-centric approach. Alternatively, Amazon could collaborate with existing carriers, providing them with access to its extensive customer base and leveraging their existing technologies.
Implications for Prime and the Data Plan Industry
If Amazon were to go through with this plan, there would be a ripple effect throughout the industry – as there always is when Amazon makes a bold move. Here’s what would happen.
Strengthen Prime Membership: By adding a wireless service to its Prime subscription, Amazon would further differentiate its offering from competitors, potentially increasing Prime membership growth and retention. Prime members would benefit from a seamless integration of services and an affordable wireless plan, amplifying their loyalty to Amazon.
Disrupt the data plan industry: Amazon’s entry into the wireless market has the potential to disrupt the existing data plan industry. By leveraging its immense customer base, Amazon could attract customers away from traditional carriers, leading to potential subscriber loss for established players. The introduction of lower-cost or even free plans for Prime members could significantly alter market dynamics and pricing structures.
Boost wholesale revenue for carriers: While Amazon’s entry may pose a threat to traditional carriers, it could also present an opportunity for them. Collaborating with Amazon as a wholesale partner would enable carriers to tap into Amazon’s vast customer base, potentially generating increased revenue from wholesale deals. Moreover, carriers could benefit from increased traffic to their 5G networks, providing a boost to their investments in network infrastructure.
As Amazon explores the possibility of launching a wireless cell phone plan for Prime subscribers, the strategic motivations become clear. By enhancing the value proposition of Prime membership and disrupting the data plan industry, Amazon aims to solidify its position as a leader in the e-commerce and entertainment sectors. By drawing parallels to Apple’s successful approach with AT&T, Amazon could utilize a similar strategy to forge deeper connections with customers and gain a competitive advantage.
If Amazon proceeds with its wireless initiative, it would likely capitalize on its existing infrastructure, collaborate with established carriers, and leverage its vast customer base. This would allow Amazon to offer Prime members affordable wireless plans or even free options, attracting and retaining a large user base while potentially disrupting the data plan industry.
Amazon’s potential move into the wireless market holds significant strategic implications for both Amazon Prime and the data plan industry. It could further solidify Amazon’s position as a dominant player in the digital spaces, increase customer loyalty and engagement, and potentially disrupt traditional carriers’ market share. As the negotiations and discussions continue, it will be intriguing to observe how the market reacts and how the wireless industry responds to the potential entry of one of the world’s largest retailers.
With one of the largest membership bases in all of the digital industries, this development has the potential to follow behind the advent of the Blackberry and the iPhone’s eventual disruption of the space. Amazon’s involvement in this business could further the iPhone’s lead, it could provide Android with the volume to gain on Apple, or it could even provide Amazon with the platform to re-launch its own phone (maybe a phone with physical buttons, who knows). Either way, carriers are unnerved by the news.
By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams