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Amazon Could Have Put the Hurt on Other Android Phone Makers, but Didn't

With the Fire phone, Amazon hasn't shaken up the economics of the traditional cellphone business at all.

Android phone makers: You can exhale.

Amazon’s Wednesday debut of the Fire phone featured an array of gee-whiz features, including a quasi 3-D display and the ability to scan and identify real-world objects. What it failed to do was pose a serious threat to incumbent Android handset makers.

Ahead of the event, rivals feared Amazon would throw the full weight of its empire and influence behind its first smartphone, launching the device at an aggressive price point, underwriting its service costs — or both.

But none of that happened.

The Fire phone’s starting price is identical to those of many other high-end smartphones — $199 with a two-year contract, or $649 unsubsidized. And the service plans offered alongside it are AT&T-standard. Amazon isn’t picking up any data costs, even those incurred while using its own services.

With the Fire phone, Amazon hasn’t really shaken up the economics of the traditional cellphone business at all. If Amazon believes that the commerce opportunities the device creates will afford it greater pricing flexibility, the company’s not letting on. Not yet, anyway.

CEO Jeff Bezos once said, “We want to make money when people use our devices, not when they buy our devices. The continuing relationship with the customer is where we hope to make money over time.” That was certainly true of Amazon’s line of Kindle e-readers and tablets. Can the same be said of the Fire?

Of course, as TechKnowledge Strategies analyst Mike Feibus notes, Amazon didn’t launch its first Kindle Fire tablet at a particularly aggressive price point, either.

“Amazon didn’t start a tablet price war on Day 1,” Feibus said. “That came a year later, when it introduced the 2nd generation Fire tablets.”

Feibus said that Amazon may be looking to keep sales of the first phone modest until it ensures it has something customers really like.

“So other Android phone makers may be breathing a sigh of relief today,” he said. “But they’d better keep looking over their shoulders. This thing isn’t over. Not by a long shot.”

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