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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

June 16, 2014 at 9:36 AM smartphone preview: a Prime deal?

The biggest show in town this week is “Revenge of the Thrifty Nerds,” starring founder Jeff Bezos.


It starts out with cool California kids having all the fun before the geeks in Seattle get their turn.

Instead of competing for dates, they’re trying to win over consumers entering the next phase of the smartphone era.

Bezos takes the stage Wednesday, when he’s expected to announce a phone that may be his most ambitious hardware product since the Kindle debuted in 2007.

It’s great timing for a bargain-minded innovator.

People are tired of being gouged by wireless companies and by phone-makers pressuring them to upgrade to expensive new handsets every few years.

The higher end of the phone market is saturated and slowing, while phones priced under $200 are soaring, especially in developing markets.

Phone hardware has reached a sort of plateau, where you no longer need the latest and greatest chip sets to provide a good experience. Phones built on cheaper, older chips work just fine for most people.

Cameras are better, screens are bigger and batteries last longer on high-end phones. But you can run most apps, browse the Web and use the latest messaging services with an $80 phone running on a cheapo wireless plan.

Gee-whiz hardware features still get most of the attention, and Amazon’s phone reportedly has razzle-dazzle features such as motion sensors and a 3-D interface.

But a tricky phone only takes you so far, especially with new iPhones and Samsung Galaxies around the next corner.

Amazon’s biggest hope of shaking things up is on the business and service side, perhaps with a bargain device that comes with cheap or free service to buyers who also subscribe to its Prime shipping and media-services bundle.

The phone is expected to be built on the free Android operating system that Amazon and others have scavenged from Google. It’s likely to piggyback on the existing library of Android apps and will surely access the bargain-bin music collection that Amazon began streaming to Prime customers last week.

I’m guessing Amazon will also re-use some of the innovations it developed earlier for the Kindle line, such as the Mayday customer-support feature.


One of Amazon’s headquarters buildings in Seattle

Mayday uses a slick video-chat system that’s being improved through use on the tablet. Amazon could repurpose the system to provide video calling on its phone, similar to the video chat services that Apple, Google and Microsoft offer.

Amazon could also re-use the first Kindle’s wireless model. It came with a basic amount of connectivity, ensuring that customers could always get to Amazon’s store with no hassle. The service cost was bundled into the purchase price, and also offset by the sale Kindle books.

Amazon wouldn’t have to provide much wireless access to position its phone as the one that comes with “free” service. Cheapskates have already figured out that you can get by with a minimum amount of network usage, if you mostly connect via Wi-Fi at home and at public hot spots.

T-Mobile has been demonstrating this model. Last fall it began offering a free monthly dollop of data usage — 200 megabytes — with tablets it sells. Customers subscribing to voice plans get 1 gigabyte per month, for the first year.

If T-Mobile’s margin on hardware can cover the cost of free access, it should be a breeze for Amazon. Especially if “free” service is for those paying $99 per year for Prime; they may end up using the phones like a mobile shopping center.

Mobile commerce — buying things via phones and tablets — grew 23 percent last quarter, twice fast as “traditional” online sales, while offline retail was at 1 percent growth, according to comScore research.

A phone linked to Prime is likely to drive higher sales. Amazon Prime members spend far more on Amazon than nonmembers — 20 percent more, or $27 apiece on average last quarter, according comScore.

Younger people are doing the most mobile shopping.

But older consumers — who have more money to spend, the wisdom to watch for deals and may not have the latest phone — seem like the sweet spot for an Amazon phone, just as they were for Kindles. They’re also more likely to be Prime subscribers, two-thirds of whom are 40 or older, according to comScore.

Cool hardware features may position Amazon’s phone as cutting edge. But the innovations that will appeal mostly to Prime customers in the prime of life are probably things that make phones cheaper and less of a hassle to own and operate.

It’s funny. Seattle rarely gets credit for innovation because it’s not Silicon Valley, the font of all that’s new and interesting.

But I’d argue that the most exciting thing happening in the phone business lately is emanating largely from a few companies around here. They’re figuring out how to make the smartphone experience more affordable and accessible to a wider range of people.

Microsoft’s sub-$100 Windows Phones are selling like crazy and will help its platform grow three times faster than Apple’s premium offering over the next four years, according to IDC estimates.

On the service side, T-Mobile disrupted the market by making its plans less restrictive, providing more options for buying handsets and lowering the cost of entry for high-speed, high-consumption data plans.

Seattle tech companies tend to focus mostly on the business side, creating new models, platforms and infrastructure and on reaching the most customers possible, not just wealthy ones.

They continue to change the world, create thousands of jobs and build vast fortunes, but they may never be as fun and sexy as California’s gadget du jour.

Last week an East Coast newspaper reporter dropped by, marveled at the bustling tech scene and questioned whether Seattle will ever become “a flywheel of innovation like Silicon Valley.”

Let’s hope that reporter will stick around for the Bezos show Wednesday, which customers will attend along with the media.

The event will be followed by a T-Mobile announcement, revealing its latest scheme to make wireless service an even better deal.

If food is provided at either event, it could be bargain snacks from Costco, but don’t hold that against them.



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