Anywhere you can readily build infrastructure on the ground it will be less expensive and more scalable than satellite service. Satellites will be excellent for extending coverage and providing redundancy, but packets origins and destination are always on the ground so there will always be a premium for sending them through orbital infrastructure.

There are underserved areas where Amazon's delivery infrastructure might present opportunities to build out wired and area wifi services to the surrounding community. I'm not thinking they would or anything, it would be a slower and lower return investment than trying to compete for the satellite market because there are plenty of people who don't have to care about the premium.

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Satellite internet was never intended for large metro areas. Same problem as when cell coverage goes to shit in huge crowds. It was always designed for more rural areas. A connection straight to the wall is faster than wifi and ground based internet is going to be faster in metro areas than satellite. They need to do what Google did years back.

That said more competition on the ground and in space is never a bad thing when talking about utilities.

In addition to the issues others have expressed, I think we still underestimate just how damn expensive it is to send anything to space. I’m having a little trouble finding anything definitive because each site I look at seems to vary wildly in how much things cost, but a general price for low earth orbit insertion is ~$5-10k per lb and each Starlink satellite is 573lb. It’s estimated they cost between $250-500k/ea though that almost certainly does not include launch costs (my napkin math is $1.5-3 million total). SpaceX might send them at cost, since it’s their own company, significantly reducing that per pound cost but that’s still a lot of money.

These satellites have a limited lifespan and will need to be replaced every few years (once they run out of thrust fuel they’ll gradually de-orbit and burn up in the atmosphere). SpaceX’s Starlink has about 3,000 in orbit now.

OTOH, a 5G internet tower costs more like $40k, is always in range (though it’s coverage area is much, much much smaller), will have much less latency due to shorter distance, greater bandwidth, and doesn’t need to be fully replaced every few years. So putting a few thousand of these things around a large city should provide decent coverage and faster speeds for a fraction of the cost of satellites.

It’s not a bad system. There are many strong use cases for satellite internet, especially in more rural areas and places where infrastructure is lacking or hard to build. And economics of scale + slowly improving technology do continue to bring satellite costs down. It’s just definitely not the most effective internet for most urban and many suburban folks, especially in western countries where fiber and 5G towers are already very common.