Google has its fingers in a lot of telecom pies, and the industry has been abuzz with word that the tech giant has a mobile virtual network operator agreement in the works with T-Mobile US and Sprint. Google executives declined to comment on the speculation during its quarterly call yesterday, which means the rampant shots in the dark will continue.
RCR Wireless News’ Dan Meyer poked plenty of holes in the likelihood of the Google MVNO rumors, and Fierce Wireless‘ Phil Goldstein outlined the top five reasons why such a venture would fail. MVNOs certainly have a mixed history in the U.S. market. While prepaid, no-contract, low-cost offerings along the lines of Virgin Mobile USA and Tracfone have proved their longevity (not necessarily as standalone businesses outside a carrier), the industry’s foray almost a decade ago into MVNOs that attempted to outdo operators with exclusive devices or features and postpaid plans didn’t go so well: RIP Amp’d, Helio and Disney Mobile.
I talked with Paul Carter, CEO of benchmarking company Global Wireless Solutions, about the possibilities and he pointed out a few more characteristics that we usually see with MVNOs: they typically use older devices, with older operating system versions — which not limits the amount of things they can do with the phones, but “even more, it prevents them from using spectrum that’s been deployed in more recent times,” Carter said. That hardly squares with Google as a cutting-edge tech company.
Android Police reported rumors that the plans might be data-only, and word originated with The Information – which also broke the news of the Google MVNO – earlier this year that Google was exploring plans to launch cellular service in the limited markets in which it offers Google Fiber.
Carter said that in looking at the available spectrum, in the past three years or so, both Sprint and T-Mobile US have deployed significant amounts of spectrum and would have the capacity to offer to Google — even if it’s uneven in the amount of access across markets. That could be an issue because depending on whether Sprint or T-Mobile have deployed, say, 5, 10 or 20-megahertz channels, the customer experience could be very different in different markets, he added. Carter said he could see data as a primary focus, and wonders if on the voice side if Google would go straight to a VoLTE-type of offering. The problem there, though, is that if a Google MVNO operated on multiple networks, VoLTE calls are likely to be complicated even between Google subscribers. AT&T and Verizon are working on VoLTE-interoperability and T-Mobile US has already been looking at the cross-carrier capatibility, but with VoLTE still in early deployment, it’s hard to say how long it will take to work out the kinks.
Let’s take a step back and look at some of Google’s many connectivity-related projects and how wireless fits in:
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- Confirmation came this week that Google is expanding its Google Fiber offering to southeastern markets, including Atlanta; Nashville, Tenn.; and Charlotte and Raleigh-Durham, N.C. It already offers a $120 Internet and TV bundle in Kansas City. There have certainly been questions on whether Google, with money to throw at whatever it wishes, can make money on fiber deployments for which it is charging $70 per month for gigabit Internet access.
- It is dabbling in the “Internet of Things” space with the acquisition of Nest. Over at M2MZone, Dima Tohkar speculates that the Google MVNO move is IoT-related and aligned with its forays into wearables, in-car systems, self-driving cars and the Nest product line.
- Google just reported that its revenue is up 15% in the fourth quarter. That’s more than respectable growth – but the company’s online ad revenues are under pressure as mobile is increasingly the route via which users access its content and mobile ad revenues don’t generate as much money. Paid search is also expected to decline as more ad dollars move to mobile. (Also worth noting is that while Apple can command a premium for mobile advertising because its users are typically more affluent and known to spend more, the same can’t be said of Android at this point, even though it has a larger market share.) Google essentially said in its third-quarter filing that revenue from mobile advertising isn’t yet up to snuff, although company execs said this week that YouTube mobile revenue is up more than 100% year-over-year.
- The company is also investing in unconventional wireless approaches, including satellite. It was one of the primary participants in a $1 billion funding round by Space Exploration Technologies, Elon Musk’s venture seeking to provide broadband satellite connections. It has also supported Project Loon, which would rely on a network of balloons in the stratosphere to enable an LTE network.
- Even though Google sold off its Motorola Mobility smartphone business, it has noted in subsequent financial filings that it retained control of the patent portfolio that came with the unit and is leasing those patents to Lenovo.
- Perhaps most interestingly, Google has been very interested in how the Federal Communications Commission is going to shape the usage of spectrum in the 3.5 GHz band, which has been dubbed the “innovation band” and discussed as potential small cell and unlicensed-use spectrum. The FCC has proposed spectrum-sharing for 3.5 GHz and dynamic allocation, rather than reserve its use in exclusive blocks as it has typically done. The company has aligned itself with AT&T and Verizon Communications in some policy positions related to that spectrum, going so far as to conduct tests and ongoing meetings with the FCC about Google’s spectrum-access system that would allow the type of tiered access the FCC has indicated it would like to see. And as others, including consulting engineer Steven Crowley, have noted, Google has been filing permissions with the FCC for several years for experimental radio applications in various bands at locations that include its Mountain View, Calif., headquarters – possibly for an ultra-dense LTE network.
Put all of those things together and I think that a more robust mobile play for Google makes sense for its business and it’s figuring out the most profitable and strategic way to do it. I have a hard time believing that’s an MVNO, though. Perhaps because at this point there’s no sense of what would make a Google MVNO compelling, other than the fact that Google’s name is attached – which isn’t nothing, but isn’t enough. Google has a good track record for usability (I love me some Android) and knows how to create cachè (Google Glass), and Google Fiber displays its willingness to put money into offering a faster service for a lower price. With an MVNO, though, I wonder to what extent they can either offer better service – considering they wouldn’t own the network; or offer a better price, because how far will, say, T-Mobile US let itself be undercut when that’s the game it’s playing to take customers from AT&T Mobility and Verizon Wireless? The ability to switch between T-Mobile US, Sprint and Wi-Fi to get the best signal doesn’t seem like a huge competitive advantage, but that’s one of the few reported details. Having cool devices like the Nexus line doesn’t seem to be enough for a sustainable, standalone MVNO either, particularly if they also continue to be available to activate on carrier networks as well.
“There’s no doubt Google’s entrance as an MVNO could be disruptive – even more so if others, especially Apple, follow its lead,” wrote Rich Karpinski of 451 Research in a note on the topic. “But it’s also important to remember that Google’s play as a no-contract phone manufacturer via its Nexus brand was thought to have a similar disruptive impact on the hardware business, and it never reached those heights. The takeaway: It’s tough even for a company like Google to make a mark on a huge, complex industry. It could be even more challenging in the mobile services market, which already has internal disruptors such T-Mobile and existing MVNO players offering innovative service approaches. There’s some thought that Google views an MVNO offering as an experiment, in which case we can file it alongside Google Fiber, various Google Wi-Fi rumors and other even more fanciful would-be flyers like wireless-by-drone or balloon: interesting in concept but with minimal market impact.
Google has distinguished itself both by being willing to experiment and by being willing to quickly retool or jettison projects that aren’t panning out as planned – see Google Glass and Motorola Mobility. This Google MVNO could be, as NPR‘s Aarti Shahani put it, “a blip on the map of the gazillion things that Google tries to do and then decides not to do.”
“When you make wonderful products that are magical, people will find them,” said Patrick Picchette, Google CFO, in its earnings call this week (read the transcript at Seeking Alpha). But he also said in the call that “in those situations our projects don’t have the impact we had hoped for, we do take the tough calls. We make the decision to cancel them and you’ve seen us do this time and time again.”
I doubt that Google really wants to be a national telco offering a triple-play of wireless, fiber access and content, considering the disdain it clearly has for traditional telecom companies that it sees as inflexible and slow to innovate. I think that perhaps it wants to be just enough of a telco to see how far it can prod the rest of the industry into driving more innovation, and/or driving new partnerships that it can leverage, and perhaps make more inroads in mobile-related intellectual property through more strategic acquisitions (that, like Motorola, it can unload if it wants to). But if dabbling in telecom networks were easy, we’d have a lot more competition in both wireline and wireless than we do.