Friday, May 1, 2015

Tarifica Alert - Google Launches Project Fi Mobile Service

Google has announced plans to launch its first mobile phone service as an MVNO, providing wireless connectivity to mobile customers through a blend of Sprint, T-Mobile and Wi-Fi networks. Called Project Fi, this service will first try to route traffic over Wi-Fi, drawing from a database of over one million Wi-Fi hotspots, and then, if necessary, will hand traffic over to either Sprint’s or T-Mobile’s network, depending on which happens to be stronger in the given location. Google will charge US $20.00 per month for unlimited calls and SMS, Wi-Fi and international coverage in over 120 countries. Data in the U.S. and abroad will cost US $10.00 per gigabyte, and Google will refund customers at the end of the month for any data not used. The service will launch in the U.S. and will initially be available only to customers with a Google Nexus 6 smartphone. 

Project Fi’s model of routing calls over Wi-Fi networks first and then over the traditional cellular network is not a new one; Republic and FreedomPop, among others, have been exploring this business model for several years, with mixed success. Needless to say, with their budget-conscious customers numbering in only the hundreds of thousands, these small MVNOs will not be threatening the business model of the MNOs anytime soon. However as Wi-Fi hotspots become more ubiquitous, and larger players like Google jump into the game, we think that the MNOs will begin to feel the pressure, as higher-end customers (the Nexus 6 costs roughly US $649.00) also begin to experiment with plans that can significantly cut their monthly costs.
As we have noted before, Google’s core business is based on generating ad revenues from massive collection of internet data. As such, Google’s goal is to push the entire industry toward a model where data is cheaper and more plentiful. When Google announced its plan to expand its high-speed fiber network in several U.S. cities by offering cheaper and faster broadband than the incumbent operators, they put pressure on those operators to follow suit, affecting broadband speed and prices in those cities. Google’s entry into mobile services as an MVNO using Wi-Fi first will likewise put price pressure on the MNOs, and this will undoubtedly benefit Google’s core business, as well.
There are many reasons why this effort will stay small before it picks up speed—lack of broad device support, especially for popular high-end devices such as the iPhone and Samsung’s Galaxy phones, as well as reluctance on the part of many high-end consumers to rely on T-Mobile and Sprint for backup coverage, to name a few. That said, we think Google’s gentle pokes and pushes at the structure of the wireless landscape will inevitably serve to reshape that landscape.  

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