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Why an Amazon Home Internet Service Won’t Reach the U.S.

Oct 19, 2016

Amazon is reportedly planning to sell home broadband service in Europe, according to tech site The Information. The plan is an intriguing one: It would offer consumers another option for an Internet service provider, and it would provide Amazon with another pipeline to promote and deliver its Prime Video service.

Alas, if the plan goes forward, there is almost no chance it will also be offered to U.S. consumers. While many Americans might like the idea of an Amazon (amzn) Internet and video bundle, the company is not going to build it here.

The reason is a regulatory scheme that, unlike across parts of Europe, does not require Internet incumbents to provide wholesale access to their networks. The result is that Amazon and other would-be Internet providers would have to build their own infrastructures, which is typically an expensive and impractical proposition. As Ars Technica notes:

In the U.S., where consumers usually have at most one choice for high-speed broadband in any given city or town, ISPs generally haven't opened their wired networks to resellers. ISPs like AT&T have also filed lawsuits and used their control over utility poles to stall competitors like Google Fiber.

Internet service providers like Comcast (cmcsa) and Charter (chtr) would, of course, argue that rules allowing Amazon and others access to their networks would undermine their incentives to invest in infrastructure. But it's unclear if that's true or if consumers would be harmed.

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Indeed, in the case of the mobile phone market, there is a thriving market in which competitors, including Google (goog), buy access to incumbents' networks. But that's not the case for home Internet, where ISPs typically enjoy a monopoly.

So that's why Amazon is reportedly directing its Internet ambitions to the U.K. and Germany, where incumbent ISPs like British Telecom must provide access to their networks. Meanwhile, U.S. consumers can forget about Amazon Internet for the foreseeable future.

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