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Thinking Big On Customer Obsession: The Business Case for an Amazon ISP

by on December 24, 2014
 

The current ISP market in the US is hindering consumption of digital media. The time is ripe for Amazon to launch its own ISP. Such a service, while not as PR friendly as Drones, should be higher priority than Drones as it has greater capacity to change the landscape and improve costumer experience.

The Problem: The continuing transition to a digital economy and reliance on data transfer is on a direct collision course with the status quo of current ISPs. The losers will be both consumers, and content providers. While the winners will be the ISPs despite their willing disregard for their customer’s satisfaction.

The US has the slowest and most expensive internet of any industrialized nation. Between horrible costumer service, high fees, data caps, and slow internet speeds it is no surprise that no one likes their current ISP. That is putting it mildly; Comcast was voted the worst company in America in 2014 by Consumerist.com (a blog owned by Consumer Reports).

As bad as high costs and slow speed are, the bigger issue is Data Caps. 64% of US consumers have data caps. When Streaming a single 4K movie will exceed a customer’s entire data cap for the month, what incentive is there for the consumer to view higher resolution, better looking content?

The Business Case for an Amazon ISP (2)

The Size of the Problem: But this consumer spending friction doesn’t end with streaming content. It carries over to other purchases. There is no reason to buy a new 4K TV (and the accessories: stand, mounts, cables, receivers, and speakers) if you can’t stream 4k movies. Not to mention the possibility of a complete living room upgrade to accommodate the new, larger screen (sofas, lamps, carpet etc.).

It isn’t just streaming movies suffering from this issue. Data Caps and slow speed affects games, apps, and more. In fact, today, when all software is designed as a service to be continually updated over its lifetime, no longer just a one- time install, data limits reach far and wide.

Free to Play survives as business model by removing initial friction to installation. If the player has to choose which games and services they will allow to use their limited bandwidth, the consumer will choose to download and update fewer and fewer apps. When acquisition costs have skyrocketed, losing a costumer due to a data cap is only going to acerbate the costs. And when acquisition costs exceeds revenue, the model is broken. The recent Call of Duty: Advanced Warfare required as much as 80 GB in downloads for those who preinstalled the game, when Sony advised to re-download the entire game to fix bugs.

Traditional games, whether purchased on physical media or downloaded are not immune to data caps and slow speeds. A mandatory Day One patch for a retail copy of Halo can exceed 20 GB, effectively making a brand new game no better than a blank disc if you can’t download the patch.

The Business Case for an Amazon ISP (1)

Even Amazon Prime is not immune to this hard data cap. There is little added incentive for a consumer to be able to store unlimited photos as a bonus to their Amazon Prime Account, if they are restricted to download/stream their photos? Photos are no better in the Cloud then in a shoebox in the closet at that point.

The hard data cap is not going to go away based on current market or legislative pressure. The ISP landscape continues to consolidate, removing more and more free market competition and incentive to remove data caps and increase download speeds.

Current Untenable Solutions: In fact this issue has already reached an impasse and resulted in a horrid set of solutions for the Customer. On the Steambox OS (which is dependent on streaming all of its media), the user can set the Max Download Size for a given period of time.

Most Android phones have a similar option to set daily rations of download data and notify the user when they are approaching the end of their cap limit.

On iOS, there are no built in data cap management systems, but there are apps that can be used to help monitor usage.

If a consumer must decide to wait until next month to watch a movie or download a game, that purchase may be gone forever due to time, other interests, schedules. Amazon has spent a great deal of time streamlining both the shopping and delivery experience. Data caps are the antithesis to that core value.

Invent and Simplify: The solution should not to encourage customers to consume less content or to more closely monitor their data consumption. In virtually every other market we reward, not punish, a customer for making additional purchases. We give them lower costs, free shipping, additional gifts and rewards. As more and more content is delivered as bytes, the solution must to allow consumers to enjoy more content. An Amazon ISP, with Amazon’s Customer Obsession is an excellent solution. When Amazon needed a delivery service for fresh produce, it built its own delivery system, an ISP is no different.

Apple and Microsoft do not have the long term will to start an ISP, leaving an opportunity for Amazon. Even if Amazon decided not start their own ISP, the poor quality of ISPs in the US Market is one that Amazon needs to address, if through no other avenue than forming an industry wide collective lobbyist organization to fix the ISP system. If not, lost revenues will continue to mount, and the money will to the ISP monopolies rather than the funding of new content and better consumer experiences.

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