Google wireless: A good deal for consumers?
Unlike what's typical with most mobile devices, Google's (GOOG) new wireless service will only bill customers for the amount of data they actually use. But the pricing may be less than compelling for the roughly half of consumers using family plans.
The technology giant announced its wireless service this week. Nicknamed Project Fi, it works with T-Mobile and Sprint to find the best available signal at any given time for either voice or data.
Rumored since January, Google in March acknowledged the project was in the works. Now that the details are out, it seems the financial arrangements are relatively novel. Although the new service isn't likely to be a major revenue source for Google, it will give the company a chance to experiment with a level of platform control that not even Apple (AAPL) has obtained.
"We don't think Google's objective is to disrupt on price... it is to build a better service," said Jonathan Chaplin, an analyst with New Street Research, in a note. "If Google can get a sufficient base of subscribers (we think they will) while controlling the hardware, the software and the service, they will be able to experiment and innovate across silos which have previously remained separate."
Initially, the service is only available to people who own a Nexus 6 phone, which can support access to multiple networks. Although neither Sprint (S) nor T-Mobile comes close to the level of coverage that AT&T (T) or Verizon (VZ) have, the ability to shift from one to the other to find the strongest connection will help reduce potential service restrictions.
Unlimited voice is $20 a month and data is $10 per gigabyte. So if you choose three gigabytes of data, your monthly bill would be $50 before any taxes. If you don't use all the data in a month, you get a rebate for the dollar amount, rather than carrying data over, which is a popular approach among the major carriers.
However, people who make heavy use of data could go directly to Sprint, T-Mobile, Verizon or AT&T to get either unlimited data plans or ones that offered a better price per gigabyte. According to an analysis by BTG Research, more than half of customers use data sharing plans for families. For a 10 gigabyte shared plan, Google is more expensive by 15 percent than Verizon, AT&T, or Sprint and 23 percent more than T-Mobile.
The flexibility to use multiple networks, while an advantage in principle, is undercut by the service not being compatible with AT&T and Verizon, the largest networks.
The requirement of a Nexus 6, which Google says is the only phone that supports multiple networks in the way the service uses them, means a fairly restricted potential group of customers. Many assume that Google sees this as it does its fiber services in various cities: as a way to goad vendors into providing better and cheaper service. Google still makes virtually all of its money in advertising, not selling products.
One of the hallmarks of mobile platform success is the ability to control the experience of users, something at which Apple has excelled. Google's open-source approach toward its Android platform lets others like Amazon (AMZN) create their own variations. But there has been evidence that Google uses licensing arrangements to exert more control over what handset manufacturers do.
But neither Google nor Apple control the carriers, who can exert their own form of control over how services roll out. By developing what is essentially a test bed for integrating a mobile carrier with its own platform efforts, Google can see whether stepping beyond the usual arrangements with carriers pays off. Plus, they get a lot more data, which is what helps keep the advertising machine going.