Fire phone: Amazon’s secret plan to burn the iPhone

It’s all about Prime Data

Last week, Amazon launched its Fire Phone with a number of impressive features: an immersive “3D” screen, the object-identifying Firefly feature, a free, live on-device video tech support called Mayday and a full-year of Amazon Prime. Besides all of this, what could really set it apart is the not yet official Prime Data (first reported by BGR).

Amazon has been working quietly on mobile data access since 2007. That year, Amazon tried an unprecedented business model with the launch of its Kindle: mobile data access was bundled with the price of the device. For the first time, people were able to download “books” anytime, anywhere, for free without Wi-Fi. Of course, owners had to pay for the content but never for the data usage. To deliver this unique experience, Amazon was using the Spring Nextel’s 3G network and paying its own bill at wholesale price, subsidising the data cost through the content purchase. In 2009, Amazon ditched Sprint for… AT&T. (This is not surprising that the Amazon Fire Phone will be available exclusively with AT&T.)

Amazon Prime started with fast shipping. For a yearly fee, you could get products marked “Prime” in just 2 days. But this was just the beginning. Amazon is constantly improving Prime. Now the subscription includes Instant Video, the Kindle Owners’ Lending Library and the brand new Prime Music streaming service. A week after its launch, Prime subscribers have already streamed tens of millions of music.

The next thing to be bundled to Prime could be “Data”. Some rumours say that Prime Data will give access to all Prime services for “free”. This means data usage when using Prime services would not count against the overall data allowance. This would be similar to what Amazon had tried for its Kindle, the difference being the amount of data consumed. Likely a first step, the second one would be the complete subsidy of mobile data access through Amazon prime subscription. Instead of paying your mobile operator, you would pay Amazon for data and content. The first year would be included with the purchase of your Amazon smartphone.

Burning the iPhone? The Fire phone and its bundled Amazon Prime is the most innovative smartphone “product” we have seen in years. While not enough to burn the iPhone, it will pose a significant threat to Apple and Google. They will be forced to react. We can expect:

• the subscription model to become even more central to the strategy of those 3 giants

• an increase competition to provide more value as part of the subscription. Amazon is well ahead of this game however Apple has acquired Beats Music a few weeks ago and the launch of a new YouTube music subscription service is imminent

While the 3 giants as well as Samsung fight with each other, network operators will be forced to innovate on the network side and the Tier-1s able to provide multi-national data access will have a huge advantage compared to the mostly national Tier-2s.

A new kind of digital service provider. True, the Amazon Fire is technically impressive but it is the business model that could surprise us most. Amazon is the e-commerce leader, dominates largely cloud computing, has access to exclusive content, is able to operate with razor-thin margin and Jeff Bezos is widely recognised as one of the best entrepreneurs of our time.

Amazon can become a new kind of operator providing access and content. It has been tried before with the AOL Time Warner merger and it was a disaster but Amazon is not AOL.

You can contact me @florentstroppa