My guess is Amazon wants to rope people into their ecosystem, and they've recognized that many startups have opted for the cheaper VPS providers in their bootstrap days. This is an intriguing move and one that I'm sure DigitalOcean, Linode, and Vultr have been fearing may happen. The pricing is on par with these alternatives in the VPS space.
Digital Ocean's pricing has remained the same since 2013. It'd be nice if they bumped the $20 plan to 3GB RAM (or go full Linode at 4GB)
$20
4GB RAM
2 CPUs
$40
8GB RAM
4 CPUs
Some VPS providers already have similar offerings.