Amazon might be getting into the phone service game, but is it a good idea?

Ryan Haines / Android Authority

Many of us already turn to Amazon for our shopping needs, but with Amazon Prime struggling to retain subscriber counts, a new report claims we could soon see an Amazon-powered phone service as well. According to Bloomberg, Amazon is currently in negotiations with Verizon, T-Mobile, and Dish Network as potential partners. These talks have reportedly been going on for about two months.

The idea of Amazon getting into the phone biz is nothing new. There was the failed Fire Phone hardware attempt back in 2014. There were also rumors that Amazon was interested in buying Boost Mobile back in 2019, though that never turned into anything. Nonetheless, it’s not surprising that Amazon is still interested in the mobile space. The question is, would an Amazon Prime phone service be a good thing for consumers and Amazon, and do the big carriers have anything to fear from Amazon?

Some prepaid services work with more than one carrier. For example, Google Fi debuted with smart switching between Sprint, T-Mobile, and US Cellular networks. Others partner offer multiple carrier networks but make you select only one of them when ordering a SIM. And lastly, there are those like Mint Mobile that exclusively partner with just one carrier, T-Mobile in this example.

We can’t say for sure which route Amazon will take, but most MVNO carriers tend to pick one network as it’s easier to negotiate the best prices. The report claims the reason Amazon is shopping around is they are hoping to get the best wholesale prices possible. The best deals will likely require them to sign some form of exclusivity agreement. We’ve also seen companies like Google go back on multi-carrier plans, likely due to the extra associated costs of working with multiple networks. It now relies primarily on T-Mobile only — with US Cellular only serving as a roaming backup option.

So odds are, an Amazon Prime phone service will be very affordable. We really don’t know much beyond that, though. The report claims it could be as little as $10 or even free. This makes sense as Amazon continually adds new perks to its Amazon Prime subscription service. With more consumers looking to save money in our current economy, this could be another bullet point used to win folks over. Odds are you won’t be able to sign up for the service unless you have an active Prime membership. This might sound familiar, which we’ll get to in a second.

As for what kind of pricing models Amazon might take? We really can only speculate, but I have a feeling Amazon would want to keep things simple. Its customers are used to simplicity with its other services, so odds are there will just be a single unlimited plan instead of offering a bunch of tiers. Hard to say if they’d offer multi-line discounts or any other perks either.

Amazon likely sees wireless service as a perk, not a money maker

Edgar Cervantes / Android Authority

You might wonder why Amazon would bother to make its own wireless service. The reality is that the MVNO model makes it super easy, which is why we’ve seen Comcast, Spectrum, and many other cable networks create their own services by partnering with T-Mobile, AT&T, or Verizon. These providers all charge for cell service at a very discounted rate, but the catch is you are required to have an active internet subscription with the provider. They treat phone service like a perk, a way to get more folks in the door. Odds are Amazon Prime phone service would work very similarly to this.

We’d imagine Amazon isn’t hoping to truly disrupt Verizon, AT&T, or T-Mobile. Instead, they likely have smelled the blood in the air. Carriers are spending exorbitant amounts of money on their extensive 5G networks and are looking for cash infusions. That’s an opportunity to get into the MVNO game at a cutthroat rate. Not to mention prepaid carriers have finally become more mainstream in the last few years. There are many families that use services like Google Fi and Mint Mobile in 2023.

Amazon would likely use free or cheap phone service as a perk to make Amazon Prime more enticing.

About two decades ago, you’d only typically have prepaid service if you couldn’t afford postpaid or had poor credit. All this means people are more interested in alternatives to expensive postpaid services than ever before. If Amazon can buy wholesale access cheaply and then basically give it away for nearly free, it could accomplish a few things: one, bring back subscribers. Two, keep subscribers all year round. Even if it loses a little money, those benefits alone could easily make it all worth it.

I know many who only sign up for Prime during holidays and major sales. While Amazon offers a lot of perks, not everyone regularly uses Prime Video, Kindle lending, or any of the other free features of Prime. Phone service is something you do use regularly, day in and day out. If they can get people to port over their numbers, odds are they’ll stay longer. I have a feeling it would be easier to accomplish this goal if the phone service is truly free. Or maybe Amazon could get people in the door with a free tier that limits data severely, but a premium tier gives you a more “postpaid-like” experience? Either could work well.

Would Prime phone service actually be beneficial for customers? Until we know their exact terms or pricing, we can’t answer that for sure. That said, I think more options are always a good thing. Amazon has a lot more weight than many of the smaller MNVOs out there, and yet we’ve seen a lot of great things from little guys like Mint Mobile. Having Amazon in the space certainly won’t hurt customers. It’s just hard to say if the actual plans will be worth the cost until we know more.

An Amazon and Dish partnership might be the most mutually beneficial (and most interesting)

What’s interesting is the report claims Amazon is also talking to Dish, which is itself an MVNO at the moment. We say at the moment because the carrier does have plans for its own robust 5G network and has begun limited tests with more Dish 5G coverage going live in Q3 2023. For now, Dish is currently partnering with AT&T to provide its towers until it can get its own plans fully off the ground. AT&T is the one company the report says isn’t in active talks, but Amazon has spoken to them previously during the earlier stages of negotiations.

Kind of makes me wonder if Amazon learned they could get a better deal from Dish than Big Blue if they do go the AT&T route. After all, Dish is desperate to build its own phone network. Having a big partner like Amazon could be a huge deal for Dish as they build their own service. Amazon might be willing to absorb some of the costs of building the 5G network if it also benefits them. Plus, just the added exposure of Prime customers might be enough to help it start building out a user base.

Again, that’s really just speculation on my part, though. Certainly, a Dish/Amazon partnership would be the most interesting. I can see how both could have a lot to gain from such a team-up. That said, it’s possible Amazon will get a better, more aggressive wholesale offer from T-Mobile or Verizon. It comes down to if T-Mobile or Verizon feels like the quick influx of cash from Amazon is worth potentially creating a new rival.

Do the big three carriers have anything to worry about?

Edgar Cervantes / Android Authority

To say the wireless telecommunications industry is turbulent and ever-changing would be an understatement. Just in the last decade, we’ve seen unlimited data rise and then fall and then rise once again to become pretty much the only postpaid option. Then there was the death of the traditional service contract and subsidized phones in favor of phone pay plans. Even newer trends like perks are leaving as suddenly as they came. Verizon was the lone hold-out, but recently, it moved to charging extra for perks instead of bundling them into the costs.

This is an industry that constantly is shaken up as each carrier tries to outwit and outplay the others. An even bigger trend is the rise of prepaid carriers. All these things create new challenges for Verizon, AT&T, and T-Mobile. Amazon would be another new challenge if the retailer played its cards right. But would the big three be worried, though? I doubt it, and nor should they be.

For one, unless Dish builds its own network in a few years and this becomes a big runaway hit — Amazon will still be beholden to one of the big three for cell towers. This means that even if Amazon’s phone service became a smash hit, the big carriers would still be profiting from the wholesale deal, and they’d be able to renegotiate more favorable terms or incorporate harsher deprioritization for Amazon’s prepaid plans.

While the big three have little to fear, Amazon still has the potential to positively influence the mobile market if it makes the right moves.

Now, could Amazon Prime or another MVNO disrupt the big three? Absolutely. Anything is possible with the right marketing. We saw what happened when T-Mobile’s John Legere used the strategy of “acting and thinking differently” to sway over tons of customers. It took a while, but eventually, people moved to T-Mobile in impressive numbers. Granted, the Sprint merger was a large part of this, but there was positive growth even before that. Now it’s not an easy road, and I think it’s unlikely. Just never say never.

If Amazon can truly offer a phone service that’s cheap, works well, and is a valuable addition to Prime for no or very little money? That could make Verizon and others push harder on the perks front at least. Right now, we’re seeing carriers move away from including perks, but this trend could reverse in the future. After all, mobile trends tend to repeat themselves. For what it’s worth, Verizon already offers a Walmart Plus perk for $10. Considering Walmart Plus is Amazon Prime’s biggest competitor, something tells me we could see more carriers team up with Walmart if Amazon does manage to gain any ground in the mobile space.

All this would just reshape the industry a bit, but ultimately, the big three would likely remain on top. The bigger question is if Amazon could ever be anything more than a budget-bin alternative. The answer to that likely comes down to just how much Amazon is willing to spend to win over consumers in the mobile space.