If there is a lesson to be learned from "Succession" – or, for that matter, any of Shakespeare’s plays – it’s that you should never ignore the scrappy outsider when it comes to upsetting a triumvirate. Whether it’s the Roy family, the Lear daughters or the big three wireless providers, today’s juggernaut is no guarantee of tomorrow’s success.
That’s why, no matter how unlikely, the idea that Dish Network could suddenly catapult ahead of Verizon, T-Mobile and AT&T to become the dominant wireless carrier is such a compelling proposition for the wireless industry right now. With the report last month that Amazon is in talks to offer a low-cost or free nationwide mobile phone service to Prime subscribers, all eyes suddenly turned to Dish. Dish shares jumped 18% following the news, while shares of Verizon, T-Mobile and AT&T all dropped. (**After this story published, Amazon reached out wanting to clarify that Amazon, Verizon and T-Mobile have all denied the rumor that was reported by Bloomberg on June 2. Dish declined to comment. This Industry Voices article is speculation by one industry analyst.)
Prime Wireless, powered by Dish?
What had the markets so excited about a potentially transformative tie-up? In a word: timing. The timing could not be more perfect for Dish and Amazon to make each other an offer they can’t refuse, and for consumers to break away from the retail environment of the big three carriers. Wireless networks, like any other facilities-based business, are monetized through their use and in order to thrive, they need vast numbers of users consuming throughput.
Despite declining retail customer adoption, Dish’s wireless efforts to date to field a nationwide 5G network have just passed 70% coverage of the U.S. population and the company has built much of the infrastructure and institutional knowledge necessary to power a nationwide network rollout – but only if they can start realizing the benefits of owner economics.
Meanwhile, Amazon, with its giant built-in ecosystem of loyal customers, effortless purchasing and its ability to cross-collateralize ultra-cheap, or even free, wireless service, could be just the catalyst to make that mass customer migration possible. In fact, according to the latest J.D. Power data on wireless customer loyalty, 37% of current wireless customers say they selected their carrier based on price.
Among Mobile Virtual Network Operator (MVNO) customers, that rate jumps to 69%. Put another way, 6 in 10 wireless customers of the kind ultimately served by AT&T, T-Mobile and Verizon through flanker or other brands like Metro, Cricket and Consumer Cellular are at risk of conquest by a radical Dish/Amazon combo offer.
Wireless customers hungry for an alternative
Consider the variables at play: a macroeconomic environment of sky-high inflation where everything feels too expensive and everyone is looking to find ways to cut costs. A ubiquitous digital giant that already has deep customer relationships with nearly every consumer in the country. A hungry and financially motivated outsider that has been plotting a move like this for years. Something new and different in a sea of same. Could these be the beginning of the thread that forces the big three into a model that looks more like what streamers have done to the video subscribers count of cable TV?
While a union of Dish and Amazon does make a lot of sense from a timing and incentivization perspective, those factors alone would not necessarily ensure its success – many strategic partnerships have seemed like perfect fits before fizzling out. What makes this potential pairing so intriguing is its clear path to success. Customers already appear to be willing to break free of the big three carriers if the price is right, and that sentiment will only grow stronger if the low-cost carrier is associated with a brand they know and already trust.
Beyond the widespread interest among consumers in switching wireless providers for lower cost alternatives, eSIM technology has made it even easier for customers to become carrier agnostic. Without physical SIM cards tying customers to the carrier-specific phones, an Amazon/Dish partnership could easily employ a “try it, you’ll like it” strategy deployed through its app to onboard customers in the short-term while angling to retain them for the long haul, all while offering complimentary trials of Amazon/Dish services to boot. Now, what if those prospects were offered to try a Dish-powered wireless network with an Amazon gift card as a kicker?
Amazon has another ace up its sleeve: its existing mesh network. Amazon has already tried to seamlessly connect various customer devices through mesh networks with Amazon Sidewalk. Supercharging this connectivity with wireless access network enables a near-term future where a customer’s Alexa and Echo devices boost the Dish 5G cell phone service with Wi-Fi backhaul. Amazon’s personal assistant devices are already so ubiquitous that device connectivity would likely be seamless. Forget about more cell towers in residential neighborhoods – an inexpensive phone with an Amazon network that could get signal boosts in bad-reception areas of the house would be incentive enough for plenty of customers to switch.
Perhaps most importantly, that’s two massive, double-digit billion-dollar infrastructure investments (owning an ISP, and building a physical wireless network/acquiring spectrum) that Amazon either already has or doesn’t have to undertake in order to enter and compete in this space.
Where do we go from here?
While Dish likely sees any deal between itself and Amazon as a “2024 event,” according to Chairman Charlie Ergen, it’s hard to deny that the market conditions make a deal getting done in the near-term a logical conclusion. Two of the big three wireless providers are already vulnerable. Between lagging financial performance, executive shake ups and customer loyalty becoming more and more fleeting, there’s never been a better time for Amazon and Dish to make a big move. And if it happens, it has a chance to send ripple effects throughout the wireless and retail spaces.
Not everyone agrees, of course. AT&T CFO Pascal Desroches, for one, recently downplayed the likelihood of an Amazon foray into wireless, saying: “It’s sort of like those of you who watch Seinfeld. It’s a show about nothing. This was a rumor about nothing.”
To Desroches point, many crucial details – like what effect a deal would have on the price of Prime, what infrastructure would need to be enhanced to handle a vast and unexpectedly quick subscriber increase, how device retailers would be incorporated (or wound down – Amazon is among the largest seller of mobile phones on the planet) – will have to be ironed out. But this could be a deal that makes too much sense to dismiss completely. One way or another, Amazon is likely to come (back) to wireless faster than you can say, “one-click purchase,” and that could be enough to finally lead Dish to the promised land, too.
If history is any guide, the current wireless hierarchy is ripe for an upset. Will the dark horse Dish, with a deep-pocketed and well-connected partner, have what it takes to lead that charge? Whether they succeed or fail, one thing is clear: if Bezos and Ergen go “all-in,” they will likely split the bulk of the wireless pot.
Ian Greenblatt is managing director of the Technology, Media and Telecommunications Intelligence practice at J.D. Power. With in-depth industry expertise, Ian drives market strategy across the rapidly converging landscape, which encompasses the entire communication sector. You can reach him by email at [email protected] and follow him on Twitter at @GreenblattTMT.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce Wireless staff. They do not necessarily represent the opinions of Fierce Wireless.