Wal-Mart's Latest Sale: Broadband
The retail giant's ISP turn is likely to push down prices and squeeze out competition. Will other big-box stores follow suit? — Broadband sellers, beware. A new provider is on the scene—and it's a known price cutter.
Context & Ripple Effects
Wal-Mart's move into internet service extends a retail playbook it has been building since at least 2005, when it tested whether shoppers would buy cheap $398 notebooks and desktops off its shelves. The ISP launch applies the same logic to a service rather than hardware: use store traffic and a reputation for cutting prices to enter an adjacent market with thin margins for incumbents.
First-order effects
- Broadband providers now compete against a retailer whose core competency is undercutting on price, putting immediate pressure on their pricing and churn in markets where Wal-Mart sells.
Second-order effects
- If other big-box retailers follow — a possibility the coverage flags as unconfirmed, not settled — ISPs could face a second front of mass-market distribution channels bundling connectivity with retail traffic.
Third-order effects
- The pattern points toward connectivity becoming a retail commodity sold alongside electronics, shifting bargaining power from network operators toward whoever owns the storefront relationship with the customer.
The trend: Mass-market retailers are extending from selling devices into selling the services that run on them, using price leadership to compress incumbent margins.