Amazon the ISP. It sounds strange when you first hear it. Amazon, you think, is an online store. It lets you buy stuff over the Internet. Comcast and Verizon and Orange and Vodafone are the ISPs. They provide the Internet service to the world’s homes and phones.
But if you step back, just a little, you realize that Amazon is a natural ISP. One day, it could compete the Comcasts and the AT&Ts—or at least try to. You can see this in the way Amazon has already built its business. And you can see it in the ambitions of other Internet giants like Google and Facebook.
According to The Information, which cites an anonymous person familiar with the company’s discussions, Amazon is already exploring this possibility. The online news site says Amazon may sell Internet service directly to consumers alongside its streaming media offering, Prime, which delivers movies and TV shows via the Internet. It may even throw in cable channels like Starz.
This would allow Amazon to better compete with the likes of Comcast, which offers both Internet service and, of course, cable TV. As it stands, Amazon is beholden to Comcast. But if it ran an ISP, it wouldn’t be. “One of the big challenges for companies providing over-the-top video services like Netflix and Amazon Prime Video is that they are still reliant on broadband providers, many of whom are also TV providers and so have an inherent conflict of interest in helping them reach customers with high-quality video services,” says Jackdaw Research analyst Jan Dawson, who has studied telecoms regulation and carrier strategy.
Amazon started as a place where you could buy physical goods and have them delivered to your door. But things like books and CDs and DVDs are giving way to digital content, and Amazon is rapidly shifting with the times. Prime Video is its future, and that means its future depends on relationships with ISPs like Comcast.
Like Google, Like Amazon
We’ve already see much the same moves from Google and Facebook. Mostly notably, in 2011, Google started building an ultra-high-speed ISP, Google Fiber, in select American cities. In the beginning, it characterized this an experiment meant to push other ISPs toward similar high-speed services. But as Google moves more and more into video and other digital media, Google Fiber has morphed into a full-fledged business. In fact, it’s now its own company, one of the business units spun out of Google under the new umbrella operation called Alphabet.
At the same, Google is offering its own wireless Internet service, Project Fi. This service is driven by existing services from entrenched mobile ISPs like Sprint and T-Mobile. But it’s a way of working around the limitations of even bigger mobile ISPs like Verizon and AT&T.
Facebook has taken a slightly different route. Through Internet.org, it has partnered with ISPs in the developing world to offer free Internet service on mobile phones. This is a way of expanding the Internet into new areas, and it includes access to Facebook.
But it’s not just that this move can help Amazon. It’s that this aligns with what Amazon has done in the past. Like Google, it has the infrastructure and the will needed to pull this off: an enormous cloud computing businesses that already operates a lot like an ISP, shuttling enormous amounts of data across the globe via its data centers and, in many cases, its own high-speed fiber lines.
What’s more, Amazon has already made a similarly enormous move on the retail side of its business. It doesn’t just depend on UPS and FedEx and the Post Office to deliver its packages. The world’s largest online retailer now controls so much of its own supply chain, from the massive fulfillment centers it operates across the globe to the brick-and-mortar stores that are popping up in places like New York and Seattle. This is just what Amazon does. It builds and operates its own infrastructure.
That said, it can start on its new mission slowly. Because broadband providers in parts of Europe are required to offer access to their network infrastructure to competitors for a wholesale price, Amazon could cut a deal with existing European Internet service providers and offer a bundled service directly to consumers. “Amazon wouldn’t have to engage in a massive Google Fiber-style investment to make this happen,” says Dawson. “It certainly could build infrastructure over time if it wanted to lower its costs and increase its differentiation as it achieves scale. But that wouldn’t necessarily be out of the gate.”
The concern is the same concern that accompanies any ISP: net neutrality. In India, governmental officials have pushed back against Facebook’s free service, arguing that it unfairly pushes Facebook offering other Internet apps. And in smaller ways, people have raised questions about Google Fiber too.
For Joe McNamee, executive director of European Digital Rights, an international advocacy group headquartered in Brussels, Belgium, this isn’t a huge concern. Amazon can’t, for instance, offer its video at faster speeds than other video services. In August, Europe’s telecommunications regulator published guidelines for net neutrality rules, and he feels they close several loopholes. “Amazon would be unequivocally prohibited from offering speeds or prioritizing some services over others,” he says.
But that’s a ways off—if it comes at all. Today, nothing prevents the company from rolling out its own ISP and bundling it with Prime and other channels. And if that’s the case, you can bet Amazon will give it a go.