Home / Blogs

Amazon's Orbiting Infrastructure

The invisible eye of the marketplace

I have been following satellite Internet service since the 1990s, but I was surprised when I learned last week that Amazon had filed an application for a 3,236-satellite constellation of low-earth orbit Internet service satellites — Project Kuiper.

I shouldn't have been surprised — Amazon was an infrastructure company from the start.

In his first post-IPO letter to shareholders in 1997, Jeff Bezos pointed out that their distribution center capacity grew from 50,000 to 285,000 square feet and said their goal remained "to continue to solidify and extend our brand and customer base. This requires sustained investment in systems and infrastructure to support outstanding customer convenience, selection, and service while we grow."

Today Amazon infrastructure is used internally and is offered as a service to others. Their distribution centers are now highly automated and they distribute a lot more than books. Amazon also offers Web, cloud storage, shipping and delivery services, credit cards, a voice application platform, an affiliate retailer program, satellite ground stations, automated retail stores, pickup locations, Whole Foods stores and other things I am probably overlooking. Bezos personally owns the Washington Post and the Blue Origin aerospace manufacturing and spaceflight services company. (Blue Origin has a contract to launch satellites for Telesat, a Project Kuiper competitor).

Bezos' preparation for Project Kuiper was hiding in plain sight with the reference to road building in the Blue Origen mission statement: "We're committed to building a road to space so our children can build the future" and it should have become more clear when Amazon added fully-managed satellite ground station service to its Web Service offering. Amazon says Project Kuiper "will provide low-latency, high-speed broadband connectivity to unserved and underserved communities around the world." That may be true, but it is the tip of the iceberg — like Amazon saying in 1994 that they would deliver low-cost books to homes.

During the industrial era, infrastructure companies like railroads and oil and steel companies grew as quickly as possible to achieve economies of scale and create barriers to entry and profit from usage fees and sales. In the information era, data is as essential as fees and sales. Esther Dyson pointred that out in 1995, the year after Jeff Bezos founded Amazon, and it was reaffirmed recently when Softbank founder and CEO Masayoshi Son justified his billion dollar investment in OneWeb's satellite constellation, saying "whoever gets the most data wins."

Stacy Mitchel has researched the ways Amazon has applied Dyson's insight. Since many people go straight to Amazon rather than use a search engine when shopping for products, Amazon learns what people want, what they eventually buy and don't buy and how much they pay. They use that market knowledge to decide what to feature in search results, which products to brand or manufacture themselves, which companies to buy, etc. Their size and information facilitate optimal and, in some cases predatory, pricing. Mitchel cites book sales and their zapping of Zappos as examples of the latter and also shows ways in which Amazon has used government subsidy. (Imagine the price war between Jeff Bezos and Elon Musk).

Amazon harvests data from all of their infrastructure offerings. For example, Netflix uses AWS. They even learned a lot about local demographics, real estate prices, labor costs, etc. when they invited cities to apply to be the site of Amazon's future headquarters.

But, what's wrong with this? Amazon is efficient and has kept prices low, and their customer service is terrific.

That sort of reasoning has dominated US anti-trust enforcement in recent years, but it is partial and short-sighted. Prices that are low enough to maintain rapid growth suit Amazon well now, but in the long run, competition and transparency fuel low prices, efficiency and the broad distribution of wealth and income.

Industrial era concentration of power resulted in anti-trust action in the early 20th Century, but those were simpler times. In the letter to shareholders mentioned above, Bezos also stated that "there are significant opportunities to better serve our customers overseas." How can we achieve competition between global Internet service providers like Amazon, SpaceX, OneWeb and Telesat that are outside the jurisdiction of a single nation?

There is no simple answer to that question. We can't put the genie back in the lamp, but we have seen some success with government operation of neutral, free or wholesale infrastructures like roads, sidewalks and municipal backbone networks and Google has had some success with fair, wholesale networking in Africa. Europe is beginning to look for ways to encourage competition, transparency, and privacy.

Update Apr 12, 2019:

In yesterday's 2018 letter to shareholders, Jeff Bezos reported that 58% of Amazon.com retail sales are made by independent third-party sellers, emphasizing that they "helped independent sellers compete against our first-party business by investing in and offering them the very best selling tools we could imagine and build," i.e., infrastructure. He singles out Fulfillment by Amazon, the Prime membership program, Amazon Web Services, database tools, SageMaker for machine learning and Alexa, which is built into 150 different products.

He also points out that Amazon remains a small player — "low single-digit percentage" — in global retail largely because nearly 90% of retail remains offline, in brick and mortar stores. But they are working on infrastructure for them — Amazon Go stores.

He has convinced me — forget retail; Amazon is an infrastructure company.

Amazon's infrastructure yields revenue and data, and that data can be used in restraint of trade, but Amazon is not all bad. As Bezos points out, they create jobs and valuable services as do others who use their infrastructure. Elizabeth Warren and others are calling for changes to US tax and anti-trust laws, but we need to be careful not to throw out the baby with the bathwater. (Full disclosure — I loved Mrs. Maisel, the Big Sick, and many more and bought a terrific pasta cooker at Amazon.com yesterday).

The issue is further complicated by the fact that this is not a US issue; it is global. Amazon, SpaceX, Samsung and others are Global infrastructure companies in competition with China, a global infrastructure country.

By Larry Press, Professor of Information Systems at California State University – He has been on the faculties of the University of Lund, Sweden and the University of Southern California, and worked for IBM and the System Development Corporation. Larry maintains a blog on Internet applications and implications at cis471.blogspot.com and follows Cuban Internet development at laredcubana.blogspot.com. Visit Page

CircleID Newsletter The Weekly Wrap

More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

VINTON CERF
Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Comments

My earliest ICT work used the then By Sam Lanfranco  –  May 05, 2020 8:47 am PDT

My earliest ICT work used the then (1989-90) LEOS (Low Earth Orbit Satellites) to connect FLACSO Quito, Ecuador to “the world” (read: mainly PeaceNet in the US) with store and forward email. That link was soon “boxed in” by players with close links to the Ecuadorian government, the Ecuadorian banking system and access to the Visa credit card network.

ICANN’s motto flies the flag of “One World. One Internet” while commercial players view the Internet ecosystem as an Internet Commons, ripe for an enclosure movement (privatizing what is, was, could be a “public commons”) and not run in the public interest.

Potential collateral damage in this is treating the orbiting and stationary satellite zone as an atmospheric commons (much like the planet’s oceans) ripe not only for an private sector enclosure movement but for a situation where the clutter of operational satellites and the growing quantities of “space junk” produce further collateral damage for scientific research and allied space ventures.

We are almost like the early days of terrestrial zoning regulations where today any good idea communications idea, in terms of its mission and vision, may involve a struggle between players, but gets a green light from authorities. Little attention paid to the consequences in terms of long-term physical damage (e.g. pollution, waste, etc.) or its impacts on the concentration and exercise of economic power.

The launch of private sector satellites is yet another area where there is a need for a more informed public discussion before projects are routinely green lighted.

Private and public ownership of infrastructure By Larry Press  –  May 06, 2020 10:16 am PDT

Sam,

I am just getting ready to write a blog post inspired by the rapid scaling of Zoom during the pandemic. Zoom was able to scale because of existing transport and data-center infrastructure, and that is a "good" thing that was seeded by public investment but made possible by subsequent private investment in infrastructure. On the other hand, publically-owned infrastructure is another way to raise capital — for example the sidewalk in front of my house or the US Interstate Highway System.

Both have strengths and weaknesses in the short and long term. Both must be continuously monitored and revised as people inevitably learn to game the system whatever it is.

Maybe we will be clever enough to devise better systems or compromises. Years ago, I worked on a couple of studies of the Internet in Singapore where the government went beyond R and D — they were equity investors in ISPs. I don't know how that has played out. Municipal networks invest in common transport infrastructure and offer it to private retailers in many places. It seems like China funds private startups then lets them compete with each other.
---
Memory lane — did you know of Gary Garriot's VITASAT project in Africa? It sounds like they copied your project in Ecuador.

Larry

PS — Here's another post on Amazon infrastructure:
http://www.circleid.com/posts/20200504-amazon-will-thrive-after-covid-19/

Add Your Comments

 To post your comments, please login or create an account.

Related

Topics

Brand Protection

Sponsored byAppdetex

DNS Security

Sponsored byAfilias

Whois

Sponsored byWhoisXML API

Cybercrime

Sponsored byThreat Intelligence Platform

Cybersecurity

Sponsored byVerisign

Domain Names

Sponsored byVerisign

New TLDs

Sponsored byAfilias