Google is planning to set up shop as an MVNO — that is, mobile virtual network operator — purchasing bandwidth from Sprint and T-Mobile in order to offer its own wireless service, The Information reported Wednesday.
Details are sparse, but Sprint is putting a volume trigger into its contract that would allow for renegotiation if Google’s customer volume should exceed a predefined number, according to The Wall Street Journal.
Google apparently first approached Sprint more than 18 months ago about the deal.
A Google team led by Nick Fox apparently has been working on the project, code-named “Nova,” for more than a year, and some employees already have tested the wireless network. The wireless service may be launched later this year.
“Google’s high profile will lend gravity to most any strategy or effort they make here,” remarked Charles King, principal analyst at Pund-IT.
Shaking Up the Carrier Market
“This would be very disruptive to wireless data pricing in the United States market,” said Brent Iadarola, global research director for mobile and wireless communications at Frost & Sullivan.
“By leveraging an ad-supported model, Google could drive down mobile data prices dramatically,” he told the E-Commerce Times.
More than 60 percent of the U.S. population owns a smartphone, Frost’s figures show. That’s expected to hit 90 percent by 2018, Iadarola said. More than 80 percent of smartphones’ mobile usage time is spent on non-voice activities, and the average user consumes nearly 2 GB of cellular data each month. Finally, users wake up their devices to check notifications and alerts, and perform other activities an average of 60 times a day.
“All these factors create an extremely attractive environment for targeted advertising opportunities,” Iadarola said.
Other Benefits for Google
In addition to getting yet another avenue to serve ads, Google might be able to further push its Google Wallet, which has not really taken off, noted Philip Solis, research director at ABI Research.
“I’ve seen rumors online that Google may merge its digital wallet efforts with Softcard, which used to be called ‘ISIS Mobile Wallet,'” Solis told the E-Commerce Times. “They’re both struggling to get users, and they’re up against Apple, so a merger would give Google a better digital wallet.”
Further, establishing a wireless carrier service will help Google get even more information on customers than it already has.
Google “presumably would have access to data about who people called, when they did it, and how long the call lasted … which would raise serious privacy concerns,” said John Simpson, privacy advocate at Consumer Watchdog.
“It used to be that Google only provided services,” he said. “With Android, they got into devices. Google Fiber and this cell plan move them into networks.”
Rules that require Google to keep its cell data separate from data it gets from its other services are essential, Simpson told the E-Commerce Times.
Good News for Consumers
Carriers currently charge consumers heavily for adding users to their plan or purchasing additional data minutes, and Google’s entry into the market “will create more competition and might cause some of the bigger players to lower these additional fees,” Solis suggested.
The other carriers may have to slash their pricing further to compete with Google.
Why Sprint and T-Mobile?
Given that Sprint and T-Mobile trail far behind Verizon and AT&T in the U.S. market in terms of both market share and coverage, the question of why Google chose to go with them must be raised.
Isn’t it shooting itself in the foot? Or is Google testing out the market, working through the processes of being a wireless carrier, before going whole hog and buying bandwidth from Verizon and AT&T as well?
“The shift in the U.S. from rural to urban and suburban communities, where T-Mobile and Sprint are pretty well represented, is very real and continuing,” Pund-IT’s King said. “By working with them, Google should have access to a sizable population of consumers and businesses that will be interested in its services and offerings.”