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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  1. identicon
    Ian L, 6 Sep 2012 @ 5:36pm

    Maybe useless for you...

    ...but for the majority (not vast majority, but majority nonetheless) who will be using 3G connectivity as a backup for when WiFi isn't where they are (home has WiFi, work has WiFi, places they hang out probably have WiFi), the $50/year price is a big draw. Keeping in mind that a 300MB iPad plan on AT&T is $20 per month...and the 16GB iPad with AT&T LTE costs $629 (add another $100 to upgrade it to 32GB).

    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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