Amazon is in talks with carriers to offer Prime plan subscribers nationwide low-cost or free cellular service. Operators Verizon, T-Mobile and Dish Network are involved in negotiations to achieve minimum wholesale prices. Amazon plans to offer its subscribers cellular service for free or at least $10 a month to increase customer loyalty.
Amazon Prime subscribers in the US pay $139 per year for fast, free shipping, video streaming, and access to 100 million songs. Analysts say the Prime plan has fallen out of favor since Amazon raised its $119 annual price. In March 2023, 167 million Amazon customers were using the Prime plan and there was no year-on-year growth. Amazon has to compete with Walmart+’s $98 annual plan, which is a cheaper alternative to Prime and offers free shipping on orders over $35. Amazon, on the other hand, has raised the threshold for free grocery delivery from $35 to $150.
But now Amazon could be the new national brand, reselling wireless services from any of the Big Three wireless carriers. The retailer plans to offer cellular at an attractive price to its Prime subscribers, thereby encouraging customers to forgo their current cellular services. Or Amazon could go one step further and offer Prime Wireless to everyone.
On the one hand, the Amazon deal could be seen as a welcome boost in wholesale revenue for the wireless industry and a way to drive more traffic to the newly rolled out 5G networks. On the downside, the industry could take a hit if Prime’s wireless network goes mainstream and starts stealing the subscriber base from the major carriers.
A well-below-market price from one of the world’s largest retailers could easily undermine the pricing of the Big Three and entice subscribers to switch to Amazon. Currently, unlimited plans start at $60 per month on Verizon and T-Mobile and $65 on AT&T. But wireless carriers aren’t really in a position to say no to Amazon. Having invested billions of dollars in ultra-fast, high-bandwidth 5G wireless networks, they are forced to look for ways to generate a financial return on their investments.
By becoming a Mobile Virtual Network Operator (MVN), Amazon can avoid the huge costs of building its own cellular network. Several attempts by other major brands to become MVN operators, such as ESPN Mobile or Virgin Mobile, failed. Alphabet still has Google Fi service with 2 million customers using T-Mobile networks.
Amazon has made several attempts to enter the mobile market in the past. In 2014 in particular, Amazon tried unsuccessfully to promote its Fire phone to compete with Apple and Samsung devices. Next year, the company plans to start testing satellite internet services called Project Kuiper.
Wireless is already being included in broader service packages. Cable companies like Charter Communications are confident that cellular service will soon be included in the cable television bill. Charter and Comcast saw some of the strongest subscriber growth by offering cellular services bundled with broadband.