Google’s Wireless Service: What It Means for Consumers, Google and the Carriers

Earlier today, Google officially announced its plans to offer its own wireless service under the Project Fi moniker.

As expected, the effort taps three networks: LTE networks from Sprint and T-Mobile along with a heavy dose of Wi-Fi. Customers pay $20 per month plus $10 for each gigabyte of data they use.

So why is Google doing this, what does it mean for the wireless industry and is it a good deal for consumers? Here are Re/code’s answers to those and a few other questions.

So $10 a gigabyte, that’s about what I pay now for data. Why is this a big deal?

There are a couple things about Project Fi’s pricing that make it unique. First, the major carriers make you pick a plan, and typically you pay for the data whether you use it or not. T-Mobile does let you roll over unused data for a year, and ATT lets you do it for a month on some plans. But Google’s version is really just pay for what you use. Also, at $20 for unlimited calling and texting, plus $10 per gigabyte, the total monthly bill is likely to be somewhat less than most plans from the big-name carriers for most customers.

Another interesting feature is that Google is removing the notion that a mobile phone number has to be tied to a single device. “With Project Fi, your phone number lives in the cloud, so you can talk and text with your number on just about any phone, tablet or laptop,” Google said on its website. While the service is limited to Nexus 6 devices, Google’s statement suggests additional device support isn’t far off.

Why is Google doing this?

There are a few benefits for Google. First, anything that gets people online more helps Google’s core business of serving up ads. Second, the service works only with Android and, specifically, Google’s own Nexus 6 phone. That means that to take part, customers are signing up for the most Google-y of all mobile options — its phone, its operating system, its online services and its wireless plan.

Also, in Google’s ideal world, the Internet is never out of reach. Its wireless initiative, like the move earlier this week to alter mobile website search rankings, is primarily a ploy to improve the speed and accessibility of the Web for consumers.

But it’s also another attempt to prod a neighboring industry in that direction, which is also the thinking behind Google Fiber, Google’s flirtation with broadband. It’s not a bid to become a major broadband provider, although Google will surely take the paying customers. Instead, it’s a move to push the incumbents to speed up delivery and lower prices, so that more people spend more time on Google’s core services.

So why are the carriers doing it?

T-Mobile and Sprint, the two cellular networks participating, are both challengers seeking to fill their networks with as much capacity as possible. Both already have big programs in which they wholesale their service to lots of other so-called MVNOs, or mobile virtual network operators — companies like FreedomPop and Republic Wireless that offer mobile service under their own brands but use another company’s network. Economically, this deal is likely similar to those, albeit this time with an Internet giant rather than a mobile upstart.

So is it good for the carriers then?

Not necessarily. The move adds further pricing pressure to an already hyper-competitive market. It’s certainly not a good thing for ATT and Verizon, which just face yet another competitor. Even for Sprint and T-Mobile it could mean fewer customers for their own brand of service. Plus, by switching automatically between networks, Google is adding to the notion that the carriers are simply interchangeable pipes.

Additional reporting by Mark Bergen.

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