Disruption Starts With A Foot In The Door: Amazon's New Data Plan Is Limited But Potentially Revolutionary
from the need-pressure-from-somewhere dept
Amazon announced a ton of new ereader/tablet devices this morning, which is being covered to death on the various gadget blogs out there. While some of the devices look interesting (and could put some pricing pressure on other tablets), what caught my eye was the addition of a 4G LTE mobile data plan on the Kindle Fire HD. It's $49.99 for the year, though it's limited to just 250MB per month -- which is tiny. Amazon has included mobile data before in its Kindles, but those were strictly for books (which don't take up that much data). As they go further into the fully functional tablet world, this starts to become more interesting. That's because mobile data continues to be something of a racket, with just a few national providers: Verizon, AT&T, T-Mobile and Sprint (and there are limitations there). The pricing offered by those guys always seems to border on collusion (amazing how closely they track each other's pricing changes) and is always focused on keeping the prices very high.Amazon's offer here is a way to tiptoe into that pool with something of an alternative. Yes, they're just piggybacking on someone else's network via some sort of MVNO (mobile virtual network operator) agreement, so you're still really using one of the national carriers' networks. But from a consumer standpoint, it is offering something of an alternative for mobile data, at much more reasonable prices (though, obviously, the super low caps match that super low pricing). That, alone, doesn't revolutionize mobile data pricing, but it does seem like a way for Amazon to get its foot in the door and expand over time. Amazon has a long history of figuring out ways to do things in a consumer-friendly manner, even if it means undercutting others to do so (which has made it a few enemies). In the presentation itself, Jeff Bezos noted that they're focused on making money elsewhere -- basically as people buy things via the device -- and thus the company has tremendous incentive to keep the prices of the devices and the service quite low. And that has the potential to be quite disruptive.
In some ways, I look at it as similar (in a very different context) to Google's fiber effort in Kansas City. In both cases, you have companies sort of dipping their toes in the water of ancillary markets that make their primary markets more valuable. They're very limited at this time, and many people may brush them off as being useless. But that's what always happens with The Innovator's Dilemma. Offer something simple and small, and the legacy players brush it off as too small or too limited to matter. But keep improving on that, and you undercut legacy providers without them fully realizing what's happening -- often because you're using your tiny and "weak" efforts there to actually enhance your primary market, where the traditional players have no presence.
Lots of people are reasonably mocking the 250MB limit. It is kinda useless. But, look at it as a wedge, and the beginning of the climb up the innovation slope, making Amazon's core business more valuable... and things could actually get quite interesting.
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Filed Under: 4g, disruption, fire, innovation, innovator's dilemma, mobile data, mvno, pricing, tablets, wireless
Companies: amazon
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Sure, you may not be streaming netflix on your moring subway ride in, but if you want to download a couple ebooks, or an app or two? Sure.
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People need to put 250MB in perspective. This is a tablet that will often be used in a "portable" context, that is at home or work. These are wifi locations. It will be used in a fully mobile context less than a smartphone.
Now, in comparing it to smartphones, people should note that the average iPhone used less than 250MB a month up until last year (monthly usage is growing). And people take their iPhones with them every time they go out, and use them more often in places with no wifi.
So, while 250MB a month isn't going to be useful for music or video while on the go, most users will be hard pressed to use up their LTE data cap even if they do everything they want on the LTE Fire connection, except music and video. In a world of hundreds of thousands of apps, that still leaves a lot you CAN do.
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There's a time limit on this.
cf. MPAA, RIAA, the Big Six book publishers...
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I wouldn't be at all surprised if AT&T is getting a cut of that in order to offer such "low" prices.
They also haven't said what happens when you go over your limit. Wanna bet they rake in the overrages?
But hey, they also give you 20GB of storage -- which would take you more than 6.5 years to fill that up with the measly cap provided. Talk about a mixed message.
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Is the storage not accessible by wi-fi?
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Obviously... that really wasn't the point. If that's not good enough, how about the fact that you can realistically hit that 250MB cap in less than 4 minutes?
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If the legacy Telecoms weren't so busy with revenue per costumer, they probably would have done something like this themselves to open users up to a cellular tablet.
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I know, I've got tons of apps that just don't do much on my Nook Color until they can get another taste of that sweet WiFi nectar.
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And it's a foot in the door: maybe they could combine with Google and others to set up a national network as an additional load-bering support for the current infrastructure, to boot.
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Yes it can. A 4G radio can cost way more than $30.
http://www.4gltesolution.com/huawei-e392-100mbps-4g-lte-modem.html That example is extreme, I admit.
Nevertheless, don't forget that LTE is not some cheap, old 56k baud dial-up modem. This is the latest wireless wide-area technology. It isn't cheap. There's a reason handset vendors haven't put LTE in every phone yet, you know.
Of course, the price depends lots on volume of order, etc. Only 15% of current tablets are connected to cellular. Amazon must know their volumes of these LTE models will start out low.
Also, the radio Amazon is using attaches to many, many bands so that the Fire can be sold around the world. That costs more in modem/antenna costs, but saves Amazon in logistics costs.
Don't forget that this is not just an "LTE upgrade" of an existing 3G product. This one starts with NO cellular radio, no antenna, baseband, etc. So the incremental costs are bigger than a phone.
We have to wait for iSuppli or some other group to tear one of these down to get a good idea of BOM costs, but I'd bet Bezos didn't mark up the modem very much at all.
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In a world with increasingly ubiquitous wi-fi, 250MB/month is far from useless. I've been getting by on a lot less for a long time with my smartphones.
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On the conspiracy theory side of things, is this AT&T & Verizon training their customers to get used to smaller data limits? (as opposed to improving their networks)
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If they're also training me to get used to $50/year, I'm ok with that. :)
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For a very limited return in terms of additional available bandwidth - the laws of physics can't be changed.
Conservation efforts are cheap, and thus, this service offering. If you don't like it, you don't have to buy it.
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250MB is pretty damn useful
Like most tablet users, I mainly use it at work (over WiFi) and at home (over WiFi). When I'm out of home or office, I check email and occasionally browse or use maps. I suspect that 250MB/month will be perfectly fine for 80% or more of the buyers.
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Re: 250MB is pretty damn useful
But now with ubiquitous free wifi springing up everywhere in Southern California, I don't think I've hooked up through my phone in 6 months.
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Re: Re: 250MB is pretty damn useful
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While I'm concerned Bezos might just be eating his children to corner a segment of the tab market, there's no doubt this guy has some people literally sweating.
I hope they disrupt effectively and quickly, because if all data plans go this way, I might just get a smartphone :-)
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So, I'm not laughing at the low cap.
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Silk
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Wrong info
That is incorrect. I have a Kindle with 3G, and it comes with a web browser that works on 3G. They limit the amount of data you can use web browsing per month, but it has it. And it's free (not this price-per-year stuff). I'll attempt to post here from my Kindle in a few minutes.
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It might be tiny, but it is still better.
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Maybe useless for you...
If people realize that their data bucket is very limited (I remember sipping through 100MB of free data on my Google Cr48), they will make sure not to watch videos of any kind on their Fire while using the mobile network. Nor will they be shuffling through long, drawn-out high-resolution photo slideshows. If they stay away from those two activities whole on the mobile network, they will be able to download e-books, surf the web, check e-mail, post tweets and status updates, and download the occasional song from AmazonMP3 wherever they happen to be, all while paying less for a year of service than they pay for a month of service on their cell phone.
Also, I'll bet you $20 that the $50-per-year data plan will just cut off after the 250MB monthly allotment is used. No overages, no muss, no fuss. It's not in Amazon's interest to have customers getting a worse mobile data experience than on the iPad, and both Verizon and AT&T's iPad data plans work this way (I know; I've used up 1GB in a day on my LTE iPad and had to purposely buy another data bucket because my service just stopped at the end of the gig).
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Re: Maybe useless for you...
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Big Mobile Pricing
I swear I don't work for Ting or anything, I was just shocked how much less my actual usage would cost compared to the blocked out plans of the big boys.
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Re: Big Mobile Pricing
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Certainly not for everyone, I'm just surprised Sprint allows an MVNO like this on their network, which seems to counter-cut the wireless cabal pricing mentioned earlier.
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This uses AT&T's network.
"Conservation efforts are cheap, and thus, this service offering. If you don't like it, you don't have to buy it."
Oh trust me, I won't be buying it. But I'm also not buying into the "revolutionary" rhetoric.
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Not sure where that second bit came from.
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For the record, my personal cellphone connection (4G) with 2000 or so minutes per month talk time and 10gigs of bandwidth costs the equivalent of just under $20 US per month. No, it's not in the US or Europe, but in one of the more densely populated city states in the world. I also think I am paying too much... I suspect I could have gotten cheaper if I really worked at it.
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