With Apple (supposedly, at least) ready to launch a new iPhone this week, it’s also facing what might be its real “second pole” of competition with Amazon’s Fire HD. The new Kindle is iPad-sized, but more significantly it expands the notion of free wireless for some content downloads to a cheap LTE plan that could nearly cut cost of ownership in half. But that’s not the half of it. Fire HD aims at Google and also has the potential to redefine the relationship between service providers and device vendors.
Aims at Google, you say? Isn’t Kindle Fire HD (like all Fire models) an Android device? Yes, perhaps in the sense that it uses the open-source Android core, but Amazon has taken control of the higher layers and isn’t connected in any specific way to Google’s own Android release train. That means that Kindle Fire is likely to diverge more from “stock” Android over time, and since it’s already the number one Android tablet you have to take that separate thread as a separate threat.
From the network operator perspective, Fire HD is the first clear example of a device vendor going MVNO. While both Kindle and Nook from B&N have offered wireless service connections for book ordering, the new HD has a wireless plan for under fifty bucks per year. The data quota isn’t going to let you watch even a significant YouTube video, though, and you have to wonder why Amazon would put this kind of deal together. I wonder if the reason isn’t that the relationship it struck with AT&T helps that operator dodge an FCC neutrality rule.
The FCC has taken the position that content owners can’t subsidize content delivery costs in the form of premium QoS. Many, including me, believe that this could mean that the FCC would also look suspiciously at the idea of offering users content outside of their data caps, which in effect subsidizes content. But Amazon might well take the burden off AT&T by saying that it would deliver content sold from its store to consumers outside the cap. That, after all, is what it already does for ebooks.
If this is in fact what Amazon and AT&T plan, it might make MVNO status for device vendors essential in a content-competitive market. It might also make hosting MVNOs attractive to network operators because the fees they could get could include items that regulatory rulings would bar were the operators to try to collect them directly. In short, we may be seeing the dawn of the device-vendor-MVNO age of wireless. And if that’s true it won’t stop with tablets. Such a deal might be why Amazon is looking at becoming a smartphone player.
Which brings us back to Google. Android is the top OS for smartphones, but it’s not the top for tablets if you pull Amazon out of the numbers. If Amazon gets onto smartphones it’s almost sure to take the same approach it’s taken with tablets, which means it would be creating an Android phone that became steadily more different from Google’s Android. And since it’s open-source, it might attract other phone vendors. Google, in short, is at risk to lose its own creation just as it’s trying (finally) to organize the community and make Android a real brand and not just a rubber stamp.
But how about Apple? The Amazon move seems to me to further pressure that giant to move to being an MVNO, regardless of what Google might do. It may also put pressure on Apple for the cloud, because Amazon could easily host mobile device features on its EC2 infrastructure and use that to differentiate its offering. Remember that Fire already has a cloud-accelerated browsing feature. So might Apple make an announcement similar to Amazon’s? Might rumors of such a move have prompted Amazon’s Fire HD data plans?