Much has been written about Google’s foray into the wireless service provider arena. Now Google has announced its push into this market with its Project Fi offering, which is based on the mobile virtual network operator (MVNO) business model.
There is nothing revolutionary about Google’s wireless offering. Rather than acting as a market disruptor, Google has opted to enter the wireless market by launching a package similar to the one that Republic Wireless has provided in the US since 2011. So why should anyone pay attention to Google Fi? Because Google is a very large and powerful player in the mobile market. My main observations are that Fi is:
- Unlikely to disrupt pricing in the US wireless market significantly. Google Fi's pricing is a fixed $20 unlimited talk/text plan plus $10 per GB of data, plus tax; a 3GB data package will cost users about $55 per month. Interestingly, users don't pay for data that they don't use, and many Fi users will not use their full data packages: For instance, the average Republic Wireless user pays only $7.50 to $8 per month for data. Still, for penny pinchers, pure Wi-Fi plans are much cheaper. The most attractive part of the deal is the roaming aspect – but only for overseas travelers.
- Limiting itself with its lack of device availability. Google Fi relies on a network architecture that switches seamlessly between Wi-Fi and T-Mobile’s and Sprint’s cellular networks. Google Fi’s Wi-Fi calling model is hardly new. Skype, RingCredible, and hundreds of other over-the-top (OTT) providers have been using this model for years. But mobile devices have to be designed differently to work with this Wi-Fi calling model. Currently, Google Fi works only on the Nexus 6. Of course, the invite-only aspect also limits the service uptake.
- Not proposing a better user experience. Given Fi’s great reliance on Wi-Fi, it seems that Google aims to compete primarily on price rather than offering a better user experience (as it does with its Google Fiber offering). As we all know, Wi-Fi calling can be very frustrating, with poor voice quality and dropped calls. With Fi, Google can’t expect to provide a better user experience that will win over traditional 3G or 4G voice customers.
- Not very attractive to business users other than small/home offices and small businesses. This reliance on Wi-Fi will also scare off many CIOs from looking at Google Fi as a serious wireless service. Moreover, the restriction of Google Fi to the Nexus 6 kills off the service as a serious contender for bring-your-own-device (BYOD) scenarios – unless you happen to have or intend to get the Nexus 6.
So what is Google really up to? It could have chosen to introduce its own free, ad-supported plans to disrupt the market in a more forceful manner. Unlike smaller MVNOs, Google does not have to worry as much about razor-thin margins.
I think Google’s real intention is to force the traditional telcos to offer more competitive data and voice plans. To succeed, Google needs mobile users to use mobile broadband. Average revenues per user (ARPUs) in the US are still relatively high compared with other countries, which undermines Google’s overall business case. I don’t believe that Google has any real intention of building out a classic carrier network infrastructure. By becoming an MVNO, Google is positioning itself as an irritant to the traditional telcos, forcing them to rethink their pricing plans without turning them into enemies. After all, Google needs these telcos as partners going forward.