Can Amazon Become Your Internet Service Provider?
As the cable TV industry slowly collapsed, its big players, including Comcast (NASDAQ: CMCSA) and Communication Charter (NASDAQ: CHTR) offset their pay-TV losses with broadband gains. This happened because cutting the cord requires an Internet connection.
You can’t stream without broadband, and in some markets Internet service providers (ISPs) still have monopolies. In much of the United States, consumers have at most two choices, one often being low-speed DSL service.
Limited competition gives ISPs pricing power and allows them to offer notoriously poor customer service. Nothing could change this status quo because providing internet service requires a huge amount of infrastructure. Now, however, Amazon.com (NASDAQ: AMZN) has a plan to become an ISP and wants the Federal Communications Commission (FCC) to approve it.
What does Amazon hope to do?
It’s nearly impossible for any business – even with Amazon’s resources – to build a nationwide wired network. Established incumbents like Comcast and Charter have built their customer base over decades and it’s just not practical to replicate that (and in some markets established players have contracts with communities that shield them from the competition) .
Amazon does not intend to compete in the traditional way. Instead, it wants to launch a non-geostationary orbiting fixed-satellite service system (NGSO FSS) consisting of 3,236 satellites.
“The Kuiper system will provide high-speed, low-latency broadband satellite services to tens of millions of unserved and underserved consumers and businesses in the United States and around the world,” according to a letter from Amazon. to the FCC. “The prompt granting of the commission to launch and operate authorization in the United States, with the protections and conditions usually applied to NGSO FSS applicants, will ensure that Amazon can quickly begin providing new services to customers.” innovative broadband. “
Cable companies aren’t the only ones wanting to block Amazon’s efforts. SpaceX and OneWeb, both of which plan to offer their own low-orbit satellite systems to provide high-speed internet access, are also opposing the online retailer’s efforts to accelerate its plan.
SpaceX and OneWeb say Amazon “should wait for a future spectrum licensing cycle rather than getting an FCC waiver to enter the current cycle,” GeekWire reported. SpaceX has claimed that sharing spectrum with Amazon would downgrade its own Starlink Internet service. In its letter to the FCC, Amazon responds to the objections of its rivals.
“The planned configuration of the Kuiper system can take full advantage of interference mitigation techniques such as small point beams, satellite diversity, low orbital altitude, and frequency agility. Amazon remains committed to good faith coordination and to take advantage of the extraordinary spectrum sharing capabilities of the Kuiper System, ”the company wrote.
Internet choice is coming
Space Internet service as a real alternative to current ISPs is coming. Amazon is focusing on underserved areas first, likely because this is a way to get government approval.
It’s reasonable to think, however, that at some point the retail giant will have a viable alternative to Comcast, Charter, and the rest of the great internet. This is great news for consumers who lack choice and influence. This is also a potentially huge (albeit with a huge start-up cost) new venture for Amazon, which could potentially provide a return for investors.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.