Fi is Google’s own wireless network, officially launched last month. The company has partnered with US operators T-Mobile and Sprint, using their infrastructure to become an MVNO. Not only does Google provide the operating system (Android) and hardware (the Nexus 6), now the company will provide network connectivity as well. The service will leverage existing WiFi networks, and switch to the carrier networks only when Wi-Fi isn’t available. This approach to mobile communications is what some are calling ‘Wi-Fi First’.
Google wants to break the “bucket” in which customers overpay for cellular data they don’t use to avoid overage charges. In price, the service mirrors many smaller wireless carriers, such as those offered by Republic and Freedom Pop. In technology, it is more convenient than other offerings, but not a total a game changer.
So, what have operators got to worry about?
It’s unclear whether this will actually be a key strategic initiative for Google, or another Google Voice or Google Wallet that will be quickly abandoned for a faster growing, more profitable product or service. Either way, Google Fi could undercut competitor services, and its PAYG model is likely to lead to a further commodification of data, ultimately driving down its perceived value among mobile consumers.
More fundamentally, Google’s wireless vision could transform the role that major carriers play in the market. With Google Fi, Google is now poised to acquire an individual billing relationship with each of its MVNO customers: buy the phone from Google, pay Google and call Google support if you experience any issues. This model commoditizes the wireless carriers, removing their influence over subscribers, while simultaneously putting downward pressure on their margins.
The general consensus among commentators is that Google does not want to develop a traditional cellular service provider business. Rather, Fi as a service has been designed to feed into Google’s long term strategy i.e. getting more data about its users that it can turn into ad sales and greater revenue. Google can only track so much data about people via cookies on the web, but the Internet is now mobile-dominant.
By becoming a wireless service carrier, Google gains operator-level data on how, where, when, and ultimately why people do what they do. So, regardless of whether or not the company can generate a sustainable revenue stream from the Fi venture, the data generated will feed into other things that Google does. At the very least, it could serve as another routing strategy to point people back to Google’s core products and services.
Operators have known all about their customers for decades – have had just the information and relationship that Google is seeking, but have so far not done very much to exploit that knowledge. With Google about to acquire an individual billing relationship with each of its MVNO customers, will the internet giant’s unrivaled expertise in big data analytics leave traditional operators trailing in its wake, in terms of customer data exploitation?
Whatever Google’s end goal turns out to be, operators can perhaps learn something from it. Monetizing customer insights has always been fundamental to Google’s business model. For operators increasingly unable to rely on traditional service revenues, they need to invest in similar capabilities if they want to compete as a fully-fledged player in the new digital economy.
After all, the potential is there. Indeed, operators could potentially do a much better job. Some argue that they are hamstrung by a regulatory environment that is, arguably, balanced in favor of Internet players. Others simply haven’t got the tools to segment and analyze their customer insights – in which case, the race is on to implement them!
The Google Fi project may just be a testbed for Google as it explores customer usage habits, but it simply wouldn’t make sense to underestimate the world’s biggest Internet company – and the savviest operators are gearing up for the fight.