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1. FAA approval brings Amazon Prime Air drone deliveries closer
  • While this is progress for Amazon, it is far from overcoming the regulatory hurdles needed to launch a full-scale drone delivery service. It still needs a type certificate (required for each aircraft type) for the MK27 drones and a Part 119 certificate for air carriers. The FAA also needs to complete its drone-delivery framework, with rules for flights over populated/urban areas (expected to be released later this year), night flights, and drone identification. The FAA also has an unmanned traffic management system under development. We are still a few years away before residential drone deliveries are commonplace.
  • For Amazon, however, the Prime Air program is highly strategic for its core retail business. 80-85% of Amazon packages are less than 5 lbs, making a substantial proportion amenable to drone delivery. Drone deliveries at scale might cost an estimated $1 per delivery, compared to perhaps $5 today. Drones also can address the last mile, which represents 53% of shipping costs, and help Amazon meet its one-day and same-day delivery commitment – especially in rural areas.
  • Amazon has been investing in building out its distribution network to be closer to consumers, including a major expansion of delivery stations, a range of retail outlets (such as Whole Foods and the new Amazon Fresh grocery stores), and exploration of unoccupied mall space for distribution centers. If Amazon can leverage its physical footprint to launch drone delivery and achieve a cost of $1 per shipment, there will be intense economic pressure on competitors and adjacent businesses to follow.
Related Briefs:
  • Aug 28 2020 (3 Shifts): Amazon expands its network of delivery stations to bolster up a key weakness
  • Oct 11 2019: UPS Flight Forward’s FAA approval & the latest in drone deliveries
2. Amazon enters wearables with Halo wellness band & subscription service
  • Amazon recently entered the world of wearables with the launch of Amazon Halo – which includes the wrist-worn Halo Band and AI-powered services delivered via the Halo app. The Halo Band, which lacks a screen or notifications, is all about sensors that can capture physical activity, body fat composition, sleep patterns, tone of voice, skin temperature, and heart rate. It can even analyze users’ moods and energy levels by applying AI to tone of voice. The band is water-resistant with a battery that lasts up to 7 days and charges in 90 minutes.
  • Amazon Halo, including the Halo Band and a 6-month membership, is being offered through an Early Access program for $64.99 (regular price $99.99). After the 6-month period, Halo services will cost $3.99 per month. Halo Band owners who opt not to subscribe will still have access to basic functionality such as steps, sleep time, and heart rate.
  • For Amazon, Halo represents a device-based platform through which it can tap into a range of upsides – ranging from near-term device and subscription revenue to richer data about consumers and their needs. Halo also may have intersections with Amazon’s private-label supplements and health products, its PillPack virtual pharmacy, Alexa virtual assistant and ecosystem of health-related Skills, and its Amazon Care/Haven employee health initiatives.
  • Looking ahead, if successful, Halo could be a launchpad for a range of future opportunities for Amazon in digital healthcare, bolstering its AWS cloud business. The potential value in applying AI to healthcare is enormous. For instance, “emergent medical data” or health information inferred by AI from everyday consumer behavior (e.g. social media posts, searches, smart-device interactions) can offer a richer whole-person view of the individual. This can help a big tech firm identify health conditions and enable care outside of a traditional provider setting.
  • Amazon’s effort is likely to intensify the growing scrutiny on big tech firms’ access to and usage of health data. Amazon has been deliberate in describing how Halo Band users’ data is protected, and its efforts with health data to date (such as its ongoing collaboration with Cerner) have generally been centered on its HIPAA-compliant AWS cloud services. However, the use of AI and health data by big tech firms can be problematic in that it often falls outside of the purview of HIPAA and oversight of medical professionals, raising questions regarding privacy and quality of care. Apple, as a point of reference, has said it doesn’t have access to personal health data and any use requires explicit consumer consent – aligning with its broader angling to be a leader in privacy.
Related Briefs:
  • Mar 16 2020: The new HHS rules & shifting regulatory landscape around health data/AI
  • Nov 19 2019: Underdogs in the smart home – Apple, Samsung & IKEA
3. Facebook pushes back on Australia draft regulation requiring payment for news
  • Earlier this week, Facebook notified users that it was updating its Terms of Service effective Oct 1 2020. The new terms, which will apply globally, now include the line: “We also can remove or restrict access to your content, services or information if we determine that doing so is reasonably necessary to avoid or mitigate adverse legal or regulatory impacts to Facebook.
  • Facebook’s update is reportedly in response to draft regulation from the Australian Competition and Consumer Commission (ACCC) that would require Google and Facebook to negotiate with Australian news media businesses for inclusion of their content. The draft also includes a set of “minimum standards,” such as notice of changes to algorithmic ranking and news presentation, recognizing original content, and providing information about how user data collected through content interactions is used.
  • Facebook has indicated that if the proposed regulation becomes law, it would “reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram.” Google also responded by saying that enforcement could result in its free search services being negatively affected. It also put a pause on a news licensing program announced in Jun 2020, as it waits to see whether the law will go into effect.
  • At the heart of the conflict is what the Australian government refers to as a “significant bargaining power imbalance” between media businesses (such as News Corp, which has reportedly been influential in pushing for the regulation) and digital platforms. Facebook has argued that, in the first 5 months of 2020, its News Feed sent 2.3B+ clicks to Australian news sites at no charge, resulting in traffic worth an estimated $200M AUD in subscriptions and advertising for publishers.
  • Outside of these types of limited programs, big tech firms have often taken a “share the pain” approach in response to regulation. In 2014, Google responded to a law in Spain by shutting down Google News rather than pay publishers for snippets. When, in Jun 2019, the EU Copyright Directive passed a law requiring that aggregators pay for anything beyond “individual words or very short extracts,” Google announced it would remove the short excerpts from results to avoid paying publishers. Over the past month, Apple, Google and Amazon have all indicated they would pass along the costs of new digital tax regulations to consumers and merchants.
Related Briefs:
  • May 29 2020 (3 Shifts): Trump’s executive order threatens to make tech platforms liable for user content
  • Nov 9 2019: Facebook News & the current wave of news aggregators
Disclosure: Amazon and Google are vendors of 6Pages.
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