Where does Alexa fit into AWS Boost plans?

One of the concessions T-Mobile USA and Sprint have proposed, to persuade the Department of Justice to approve their merger, is to offload Sprint’s Boost Mobile prepaid subsidiary in tandem with an ‘infrastructure MVNO’ deal. That would presumably involve some spectrum and network assets, laying the foundation for a new mobile player to allay the antitrust regulator’s fears of reduced competition.

Reports indicate that there are several parties interested in Boost, most of them from the prepaid market, but the most interesting of the rumored candidates is Amazon AWS. The webscale giant has been increasingly active in wireless connectivity trials, raising the prospect that it may want to roll out its own network.

According to reports by Reuters, Amazon is considering a bid for Boost Mobile – not, presumably, for the brand, which is tiny compared to Amazon’s own, or even the customer base, but for the promised rights to access ‘New T-Mobile’s’ network for six years, and possibly some spectrum too, if that is included in the deal.

Sprint and TMO set out the terms the proposed offering an MVNO in an FCC filing, saying, “New T-Mobile will offer the Boost buyer terms for a six-year wholesale MVNO agreement that will include wholesale rates that will meaningfully improve upon the commercial terms reflected in the most favorable of T-Mobile’s and Sprint’s three largest MVNO agreements.”

Even the hint that Amazon might enter the mobile business sent operator stocks sliding, since the webscaler would have the kind of scale, technological agility and customer relationships to be a serious threat to established telcos.

Some commentators thought a move of this kind would be a way to test out a new business through a lateral acquisition, as with Amazon’s purchase of Whole Foods in the grocery space.

“This would be an excellent vehicle for Amazon to dip its toes into the wireless business,” said analyst Mark Lowenstein of Mobile Ecosystem. “It’s undoubtedly a better network deal than they would get from AT&T or Verizon. Dish is still a wild card and the timeframe too uncertain.” He thinks the motivation would be to provide a strong testing ground for new consumer experiences built around Alexa and other devices created by Amazon’s secretive R&D arm.

But is it really probable that the company wants to be a consumer-facing MVNO or MNO, and does it really need to control a network in order to test future Alexas? It looked set to write new rules for wireless data when it launched its Kindle e-readers, with cellular connectivity bundled in the price – but that disruptive model was not viable for devices with far greater data usage levels. While it made a success of the Kindle Fire, its Kindle Fire smartphone was a flop, and highlighted how Amazon can drive consumption of its retail and content services through addictive subscription offers like Prime, with no need to control the network.

It does not need an MVNO deal to reduce the cost of streaming content when this can be done OTT, at the user’s expense. It could want to optimize the user experience to differentiate Prime video from competitors, but in that case it would need more control over the network than most MVNO deals provide – indeed, recent studies have shown that MVNOs are given slower network speeds than their hosts keep for themselves. But acquiring spectrum and building its own network would be an expensive way to deliver marginal gains in user experience, in a world where most of its users probably stream video over WiFi anyway.

It is far more likely that Amazon is interested in wireless connectivity to boost its AWS cloud operation, which has been the main business unit involved to date in experiments with spectrum and wireless technology. Forget the expendable Boost brand and customers – this could be a way to access spectrum, an alternative to AWS’s previous real and reported wireless initiatives, from Globalstar’s TLPS WiFi-like band, to tests in CBRS and WiFi spectrum, to a rumored desire to be the anchor tenant for Dish’s network.

T-Mobile and Sprint have said they would resist concessions that would reduce the deal value significantly, which would presumably include significant spectrum divestments, but a small amount of 2.5 GHz (of which Sprint has plenty) or millimeter wave might be enough to support Amazon in building its own wireless networks for selected industries or applications, enhancing AWS’s rapidly evolving edge compute strategy. It is highly unlikely TMO and Sprint will divest enough spectrum to make AWS a full mobile player, and there is no reason for it to become one. But it could certainly emulate the model that the large cablecos are interested in – combining WiFi, MVNO deals and localized cellular with a local core and edge node, to create a fully controlled sub-net and provide an optimized experience for a particular enterprise, city or hotzone.

This would help AWS improve its position in some enterprises, against the entrenched Microsoft Azure, and would help it deliver an on-premise edge cloud/mobile platform that could achieve two important goals for the main cloud business – help tie customers to AWS, when many are adopting fickle multi-cloud strategies that commoditize the webscalers; and provide a reassuringly local toe in the water for organizations which have not yet taken the plunge into public cloud (a stated objective of AWS’s edge strategy).