Citing sources familiar with the matter, Reuters said Amazon is interested in taking Boost off the other carriers’ hands, because Amazon could then use the combined entities’ wireless network for at least six years, which, Federal Communications Commission Chairman Ajit Pai said, will include a 5G network that covers 97% of the U.S. within three years.
An Amazon rep said, “We don’t comment on rumors or speculation.”
However, like its recent play for Sizmek, insiders say the deal makes sense for five key reasons:
First and foremost, Boost would be another source of revenue for the cash-strapped (kidding!) company. Or, as digital privacy expert Douglas Crawford put it, “it is another product to sell for a company that already sells almost everything.”
And even if Amazon doesn’t want to add “wireless carrier” to its résumé, it could still make money by leasing the wireless spectrum to other carriers.
“The primary appeal behind this is that spectrum availability in the U.S. is both extremely limited and tightly controlled,” said Tyler Cooper, consumer policy expert and editor at ISP comparison service BroadbandNow. “Having some to lease out could be a valuable opportunity for Amazon.”
Plus, an in-house communications network would diminish its reliance on outside infrastructure to power services like Prime Video, Alexa and Ring, said Mike Dossett, vp and director of digital strategy at ad agency RPA.
Crawford said the removal of net neutrality protections in the U.S. potentially leaves Amazon vulnerable to ISPs, which could throttle its traffic in favor of their own—or that of their partner companies, such as boosting a rival streaming service.
“Without net neutrality protections, this reliance on an outside party would put Amazon in a position of poor leverage, where they don’t like to be,” Dossett said.
Crawford noted Amazon has already invested in fiber optic landlines, which is a sign Amazon wants direct control over internet infrastructure.
What’s more, an in-house wireless carrier gives Amazon a new bundling opportunity for its services and devices, like Prime, Audible, Kindle Unlimited, Echo and Twitch.
This, in turn, could make Prime membership appealing to more consumers.
“For their core retail business, more people as Prime members is arguably the most powerful driver of the entire ecosystem,” Dossett said. “Prime members are more engaged on Amazon, spend more on Amazon per year, use more Amazon products, are more likely to choose Amazon versus other retailers, etc. As a result, they are the most profitable, addressable customers for Amazon and generate the greatest quantity of data per customer.”
It could also help Amazon succeed where it failed with the Fire Phone, which flopped in part because it was too expensive to be a viable alternative to the iPhone.
“This time around, Amazon could be taking a different approach and trying to partner with a leading carrier in the pay-as-you-go space,” said Diana Gordon, managing director of the Shop+ unit at media company Mindshare. “By opting to work in the more affordable space, they may have better success a second time: They could follow their tablet/e-reader strategy which has been successful, by offering a more affordable option than the iPad to the masses.”
A telecom acquisition would also give Amazon yet another source of customer data, enabling it to emulate Verizon Media Group and advertising and analytics firm Xandr, which Dossett said use subscriber data to support incremental targeting, cross-screen measurement and addressable TV and digital video offerings.