Amazon provides an analogy to key underlying drivers in many parts of the telecom business, where it comes to shaping demand and supply of connectivity services.
What Amazon and many connectivity suppliers share in common:
- Sell retail products
- In competitive markets
- With lowish margins
- Using infrastructure and networks
- Where volume (bandwidth) is an issue
- Where latency (delivery time) is an issue
- Recurring revenue (repeat purchase) is key
- Sells high-margin and low-margin products
- Revenue sources have changed over time
- Regulation is, or is becoming a key business constraint
Consider the issue of latency, or time to delivery. Amazon is boosting its use of local warehouses, to support its one-day delivery services.
Amazon is already capable of offering same-day and next-day delivery to 72 percent of the total U.S. population, including almost all of the households (95 percent or more) in 16 of the wealthiest and most populated states and Washington, D.C., according to RBC Capital Markets.
That is supported by a network of Amazon fulfillment centers across the country.
The coming analogy in the connectivity business is edge computing, which will support latency-sensitive applications that cannot rely on distant hyperscale data centers. As consumers increasingly prefer same-day or one-day delivery, in preference to two-day deliveries, so many internet use cases and applications eventually might require extreme low latency that only can be supported by local computing.
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