Google wireless service could disrupt carriers

25 Jan 2015 | Author: | No comments yet »

Google takes another moonshot with Direct Wireless Sales Plan.

MOUNTAIN VIEW, Calif. Google’s plan to become a wireless service provider means stiffer competition for Verizon Communications and AT&T at a time when price pressure is already shrinking margins in the U.S. mobile-phone industry.

— Internet users from San Jose to Kansas City have been clamoring for Google to lay down its long-awaited fiber-optic network to compete with Comcast and AT&T in speeding up Web and television access. The Internet giant is supposedly in talks with mobile telecoms behemoths T-Mobile (NYSE:TMUS) and Sprint (NYSE:S) so Google can buy wholesale access on their networks and sell that access to customers. Reports that Google plans to sell its own mobile-phone plans this year sent a warning to the telecom industry and were met with enthusiasm from consumers, officials and analysts hoping the move will push down prices and inspire better service. Google is making unprecedented steps into the telecom game, indicating the tech company wants to be far more than just your search engine or e-mail provider. This would not be surprising considering Google is quite known for taking a lot of unexpected twists and turns in its unquenchable thirst for new revenues.

Google’s push to offer faster, cheaper wireless service plays into the company’s goal to get Internet access to more people, who then will visit more websites, provide more information about themselves and see more Google ads, generating more revenue. Unlike Google Fiber, its emerging broadband effort for which it is installing its own cable, Google has no plans to compete as a wireless carrier by building a vast network of cellphone towers. Besides the spectacular Google Glass flame out, there is a long laundry list of once hot Google ideas that were tried, funded, implemented, and mothballed.

The first category is in line with the Google X division at Google Inc., which is Google’s free space, where the company researches and develops new designs for technology that the world will need to progress forward in terms of its technological demand. But it does mean that Google will use existing cell towers to sell wireless plans to consumers — a move that could uproot the already competitive wireless provider field. Tech news site The Information first reported Google’s wireless ambitions on Wednesday, and The Wall Street Journal later corroborated Google’s apparent deals with Sprint and T-Mobile. It seems Sprint, at least, is looking for more customers. (Video viaThe Wall Street Journal) “Sprint executives are betting that the boost from an influx of new Google customers outweighs the risk that the Internet search giant will learn too much about the ins and outs of the wireless business.” Much like its Google Fiber broadband service, Nova seems intended to pressure the rest of the wireless industry into cutting its prices and improving its services. However, if successful, Google will introduce driverless cars to the world, encouraging people to propel forward and utilize the technology that is made available and dismissing the olden ways.

Android Police writes, “a Google-led cell phone service could drive prices down and give Google control over distribution and software of their (and other OEMs’) devices.” Verizon’s chief financial officer, Fran Shammo, referred to the search-engine giant as “just another competitor” in an intense market during an earnings call Thursday. “If you look at Google, they have entered the fiber. Considering how fast technology moves and how technology companies can get quite territorial, this might be viewed as Google shooting itself in the head in the mobile space. Masayoshi Son, the president of SoftBank, which bought Sprint in 2013, was integral in facilitating the talks between Sprint and Google, according to a person with knowledge of the matter. Google’s aim is to become what is known as a mobile virtual network operator, or MVNO, reselling the services it buys from major carriers by offering its own Google-branded data or voice plans. “Resellers, or people leasing the network from carriers, have been around for 15 years,” Shammo told Verizon investors. “It’s a complex issue.

Regardless, considering the scale and core competencies involved, this initiative, assuming it gets fully launched, might get be another dead-end Google project. As no official announcement about the Nova project has been released by Google Inc. itself, not many details have come into the open about it as well. Google siding with the underdogs could be a “game-changer” in the long run, grabbing market share from the giants, Pacific Crest analysts Michael Bowen and Trevor Upton wrote in a note to investors. “Any time Google does something it rightly catches people’s attention because they can take big steps like this,” said Matt Wood, policy director at media-reform group Free Press. “But I wouldn’t overstate the importance of it. Sprint reportedly added a clause that calls for a renegotiation if the service volume gets too high (in other words, if more people start choosing Google over its services). Google’s entire monetizing strategy works in a manner that formulates a direct correlation between the number of users on the internet and Google Inc.’s revenue from advertisements.

There are other people who do the same things, including big-box retailers like Wal-Mart.” Google Fiber has rolled out its cables and utility poles in parts of Kansas, Missouri, Utah and in some Austin, Texas, neighborhoods, with plans to expand to San Jose, Santa Clara, Sunnyvale, Palo Alto and its home, Mountain View. “It’s more convenient because you can be a one-stop shop,” said John Bergmayer of Public Knowledge, a consumer-advocacy group. “Once they bundle these products, they can give a little discount.” Whatever its plans, Google has not yet sought the permission to offer wireless service from the Federal Communications Commission and the California Public Utilities Commission, though both agencies are likely to welcome another competitor. It could use MVNO arrangements to market and refine an array of tools, including search, maps and e-mail, delivered via Android, the most popular smartphone operating system globally. It hasn’t had to deal with these sort of tasks often, given most of its services are ad-supported and can be offered for free – not to mention shouldering the blame if any wireless coverage gets spotty or goes down. While Android phones already sync users with various Google apps like books, music, maps, and YouTube, it’s possible the company could offer free streaming TV shows and movies to lure customers. Google may aim to rely overwhelming on Wi-Fi signals in order to minimize the traffic over Sprint’s or T-Mobile’s network, according to Craig Moffett, an analyst at MoffettNathanson LLC.

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