Quick Posts 3 - Google Fi is a DANGEROUS Move by the 'Do No Evil' Guys

Next up, Google. So yeah, we've been seeing the rumors for a long while about a Google MVNO and it became gradually confirmed. But now its launched and wow? This really is a dangerous move by Google that is likely to greatly anger the carrier community.

What is Google Fi? Its the MVNO that Google sets up in the USA, where people can buy a Google contract to have voice, messaging, data etc for a set data limit per month, costing 30 US dollars to start with. You can buy more data capacity and Google will refund any unused data (typically by rolling it into the next month's fee). So Google buys airtime wholesale from the big US carriers and then resells that. Nothing bizarre in that as a business, Virgin Mobile has made a successful business out of that idea in countless countries from Britain to Canada to Australia (I think their only failure as an MVNO was in Singapore) But here's the rub. Google with Android is a supplier of tech for carriers. Android powers over 80% of all smartphones sold, and this Quarter (April-June) that means about 56% of all phones sold worldwide, smart or dumb, powered by Android. Most of those phones are sold in carrier stores and the vast majority of whats left are by major chains of retailers who won't want to sell phones that the carreirs don't support.

Android reaches 1.5 Billion pockets today. Thats bigger in reach than Facebook (and growing FASTER than Facebook, yes thats true). Why would Google now threaten this amazing growth engine.by angering its retail channel? For a few lousy pennies they can make in the MVNO business as a late entrant on razor-thin margins? What is wrong with them? The VAST opportunity in mobile is the CONSUMER DATA opportunity, the holy grail of tech. And Google has just last year become the single biggest player in mobile, having access to more consumers than the largest telecoms carrier/operator (China Mobile). Why now play with this deadly fire? I really think this will turn out to be a bad move by Google.

So the Google Fi service is one that hunts for WiFi hotspots and migrates the traffic to WiFi whenever a suitable network is within range. Now thats nice, isn't it. Google is a supplier of the telecoms carriers, and now enabling a bypassing network arrangement where (increasingly) part of the traffic is bypassing the carriers altogether! Paying them nothing for this part. Let me feed you poison, but I'll put in some sweet strwawberries in here so it doesn't taste as bad. This is the same poisoned deal Microsoft was peddling with Skype back in 2011 to the carriers who all turned it down immediately. What is going on now?

Part of Google's calculation is the 'I am truly evil but I claim to do no evil' ploy. They played nice until they became too big to stop. Now that Symbian is dead, Maemo is dead, Limo is dead, MeeGo is dead. Windows Mobile is dead (the old Microsoft platform, not Windows Phone). bada is dead. And Windows Phone while pretending to be alive - is dead. Blackberry is good for dead. And Tizen, Firefox, Mozilla, Sailfish are way way too tiny to matter. So its only the iPhone and iOS is 'worse' with iMessage etc not giving the carriers a penny.

So now, the carriers will never go from the slow poison of Android and Google Fi to the fast poison of Windows Phone with Skype. That won't happen. Theoretically Blackberry has an opening here claiming they are the least dangerous of the smartphone OS platforms, and their data algorithms DO save in some internet web traffic so carriers actually see less load on a network accessing the same web pages on a Blackberry than on an iPhone, Android or other smartphone. But they still have BBM so they're still also a threat, but the least of this bad bunch. And besides, Blackberry's phones are horrid right now, nothing nearly competitive so there's little hope they could in any way replace Android.

So the window opens for Tizen and Firefox (and the rest of the minnows). If Samsung can roll out rapidly a series of competitive Tizen devices, across all price points - and if Samsung promise with written contracts to carriers that Tizen will not include any native free messaging or VOIP services, and Samsung won't launch as MVNO anywhere - this could be the come-back for Tizen after several failed attempts to launch.

Same goes for Firefox. If I was running Tizen or Firefox, I'd go out of my way to get the word into the public domain by all our handset partners etc, that there is no MVNO threat here, no Skype threat here, no iMessage or other such threat here. That my OS (Firefox or Tizen) is the friendliest OS there is, and carriers should prioritize this one instead of the parasites they see in Windows Phone, Android, iOS and Blackberry.

I honesty didn't expect Google to take this path. I do think this is a mistake. Google does learn fast, however, and they may well soon repent and change. Remember they made a similar mistake with the original launch of the Nexus as a Google-manufactured smartphone on Android. That did not go well with their handset partners, they didn't want Google as a direct competitor. So G soon fixed that, by licencing the Nexus product brand individually by Andorid OS generation to a different handset maker every cycle, as a 'reference phone' or premium phone. So LG would do a Nexus, then Motorola would do another Nexux, then HTC would do a Nexus model, etc. We might see the MVNO Google Fi project soon transform itself into something less threatening to the carrier community. If that happens. the only driver of that change was hostilty by the carrier community to Google Fi.

Separarely as a consumer and thinking of the US market alone, gosh, that is such a consumer-hostile market by arrogant US carriers, they certainly need several kicks in their asses, and Google Fi is good for the US consumer. But globally, I think this was a very bad miscalculation by Google and carriers worldwide are quite unhappy with the 'Do No Evil' boys from Mountain View.

Ok, thats Google, now lets see what else is happening in tech right now..

Comments

[Winter]

Tomi,

I can see how Google Fi will hurt in the USA and maybe a few other countries with ridiculously high carrier margins. But in Europe, the rates are pretty competitive against what Google is asking in the US. China is a no-go area for Google, and South America seems to be quite competitive.

So I cannot really see how Google would be able to make headway by rolling this out outside of the US.

But maybe it is just a ploy to break open the closed market in the US. It might be a good way to increase market share of Android in the US.

[E.Casais]

"Why would Google now threaten this amazing growth engine.by angering its retail channel? "

A hunch: Google money making machine is ad space, and it has some trouble being as successful in mobile as in desktop ads.

In mobile, Google can collect and tabulate data to segment target markets only when end-users rely upon Google services.

By becoming an operator, Google can grab information about every Internet service end-users access (for instance even the sites they access directly, without mediation through Google search), and therefore fine-tune its ad-space selling algorithms, and discover opportunities to insert or design new types of ads in the mobile world.

From that perspective, the income from traffic fees or subscriptions is secondary to Google.

[Crun Kykd]

We'll get to see a real accounting of where the power lies in the handset-carrier relationship. Things change over time, technologies, customer perception, true core competencies. Detroit saw this with electric cars and self-driving tech, they aren't all that. Carriers will learn it with roaming tech across vendors and WiFi/LTE. New well-financed entrants can be successful.

[RottenApple]

@Winter:

"But maybe it is just a ploy to break open the closed market in the US. It might be a good way to increase market share of Android in the US."

I'd say that's the plan here. Something needs to happen to bring the US carrier market into the present.

I also agree that in more competetive markets they'd face an uphill battle because they have to deal with far more agile competition than the crusty US market has to offer. And my guess is that they'd keep their hands off Europe anyway to avoid getting into more trouble with the regulators.

[Catriona]

Do carriers even care about SMS as a revenue source anymore? Here in the US the carriers give away unlimited voice and texts with every new mobile share plan. They make their money on tiered data now. If anything, it's Google's wi-fi move that would have them angry, but US consumers, according to the Pew study, are already pretty savvy about switching to wi-fi. We have them in sports stadiums, coffee shops, some subway stations, and even some municipalities are setting them up. Google's move will just accelerate that. Plus, they did get the buy-in from T-Mobile and Sprint. Since Google's move is US-only for now, I don't see how they will upset the carriers too much given the business model here.

[Richard]

I also wondered what was in it for T-Mobile and Sprint. I have a hunch that Deutsche Telekom and Softbank may view this as a potential exit strategy for their US business. As you point out, FI makes no sense for them and should be viewed as a threat. I wonder if they aren't thinking that potentially this may lead to the sale of T-Mobile/Sprint US to Google and allow them to exit the business if they so choose. Both companies have reasons to exit the US market and a sale to AT&T or Verizon wouldn't pass regulatory hurdles.

Also, Virgin Canada was a failure (for Virgin) and is now wholly owned by BCE; this is hardly surprising in the Canadian market which is thoroughly dominated by BCE, Rogers and Telus.

[RottenApple]

@Richard:

"FI makes no sense for them and should be viewed as a threat"

Maybe they are just smart and see where things are heading.
It wouldn't be the first time that companies fought to the bitter end to defend their obsolete business model - and in the end they still lost because change was inevitable.

[Catriona]

@Richard, Sprint is in a vicious cycle where they are losing customers because their network is bad in many areas, which is costing them the funds necessary to complete their network upgrades. Where they have made the upgrades, their network is actually pretty good. So they definitely have an incentive to get whatever business they can from Google. T-Mobile has been buying market share through a price war (which has started to subside), but has a parent who wants to exit the U.S. market. The regulators have already made it clear they don't want any of the 4 major carriers merging with each other, so I doubt Google could buy both, and they might not want just T-Mobile or Sprint individually.

[abdul muis]

@Tomi,

Let's talk about some 'fact' first.

T-Mobile also have a Voice over WiFi/internet.
http://www.t-mobile.com/offer/wifi-calling-wifi-extenders.html

AT&T also have a similar technology
http://www.att.com/att/microcell/

Google Voice
https://support.google.com/voice/answer/115061?hl=en
(number) https://support.google.com/voice/answer/150640?hl=en

Google has a Skype competing technology that already in BILLIONS of android handset, and available for iOS device. It's called Hangout
http://www.google.com/+/learnmore/hangouts/

President Obama use hangout
https://www.youtube.com/watch?v=-gU09bWifFo
https://www.whitehouse.gov/blog/2013/02/14/watch-president-obama-answers-your-questions-google-hangout

Last Google Fi....
https://fi.google.com/about/

---

I think Google Voice is MORE THREATENING to carrier than (Google) Project Fi. With Google Voice, anyone in US can apply a US phone number that can be called from fixed line and use their carrier as A TRULLY DUMB pipe. They can also use this number while on other countries. ex. you, Tomi, went to US, got the Google Voice number, and when go back to HK, you still have the US number without the need to spend a dime to maintain the phone number.

With (Google) Project Fi, the customer MUST pay Google, and CAN'T use their existing carrier as the dumb pipe. Thus, Google is JUST another (MNVO) carrier. But T-Mo & AT&T, and many carrier around the world already use this 'KIND' of tech too. So, I don't see where's google are aiming with this tech.

Talking about skype, Google also own a competing product, called Hangout, even Obama use it on a regular basis. It's even better than skype, as hangout also suited for live broadcasting (skype were not suited for live broadcast).

So, in recap. I think Google Fi doesn't make Google MORE EVIL / THREATENING to the carrier. Google already have a product that can be more dangerous to carrier.

[abdul muis]

@Tomi

But what about Apple Virtual Sim, who's toe will apple step? The apple user or the carrier?

Let just start with the statement first. I don't know anything about Apple Virtual SIM, and what I'm gonna say is just based on assumption.

First...
If Apple gonna use it to protect the carrier from user Jailbreaking and Carrier Unlocking, then apple user is the one that's gonna be hurt. But iSheep will still buy it and praise it. Is it gonna hurt the apple-carrier relationship?? NO.

Second...
I also read a rumors that Apple gonna use a control on which carrier user can use. ex. if I want to travel to France, I could go to Apple store, and BUY a france virtual sim card before I go there. In this case carrier will be hurt.

As I said... I don't know anything about it, So I wonder, do the skype/Fi is more threatening compared to this virtual sim?

[Catriona]

@abdul, for now the Apple (physical) SIM is limited to the iPad and is optional. Verizon has opted out, and selecting AT&T permanently locks the SIM to that network (you can freely choose between Sprint and T-Mobile plans, though). My guess is that Apple may offer an Apple SIM in the next unlocked iPhone, and that they will make a push for a virtual SIM to be adopted as an industry standard. It makes a lot of sense. SIM cards take up space and their functionality can be duplicated by the secure elements in other chips already in mobile devices. If it is an industry standard regulators or standard setters can address lock-in concerns by mandating that they be open to all networks.

[charly]

Samsung is Korean. I was extremely surprised that Samsung didn't have a non-virtual MVNO in Korea. LG does.

Firefox has Firefox Hello. Don't know if it works in the mobile version but it is something that everybody expects that they will bring to their mobile browser.

Every triple play ISP also seems to bring out an Android app so you can use your mobile phone as land-line phone.

[Patrick]

Hi Tomi,

I agree with other posters here that this is not an evil move by Google. We should look at Google Fi in the US the same way we look at Google Fiber. Fiber was not successful for Google in driving tons of new subscribers away from Cable Operators. But Fiber has been very successful in prodding Cable/Telco Operators that the old Operator business of $50/month for 50MB/month is outdated. Fiber has light a fire under AT&T, Cox and even Comcast has recently thrown its hat into the "1GB ring." Fiber's whole goal was to get US Broadband Operators to invest in faster pipes so US consumers would see more Google ads and use more Google services. Seems like a pretty solid idea.

I believe that Google doesn't want to fully engage with US Wireless Operators, it just wants to force them to adapt their business models. Look for example at what Cablevision did with their WiFi first calling plan. Another commentor mentioned how US Operators (plus Apple) are all gravitating towards WiFi first calling. Many wireless customers get their wireless data at home via their Cable/Telco Operator and they get their wireless data at work/school from employer/school. So if you only need LTE data when you're in between home and work/school, do you really need to pay Wireless Operator $50-$60/month for that? It seems like Wireless Operators are charging a lot for what is essentially LTE roaming when you're in-between WiFi networks. As a consumer, I don't think that network service is worth $50-$60/month and I think more competition for wireless services is great for consumers.

Also, If you look at how heavily Cable/Telco Operators have invested in WiFi, it starts to make more sense why Google would launch Google Fi. LTE is no longer the only game in town for wireless services and WiFi is going to be increasingly important.

[R]

I've been finding this to be too entertaining:
http://what.thedailywtf.com/t/enlightened/8795
A discussion about what makes Tizen hard to develop for, started by an employee of Samsung.

Of course, the real WTF is Jeff Atwood's Discourse forum system. So trendy, but so difficult to use.

[baron99]

@R
"A discussion about what makes Tizen hard to develop for, started by an employee of Samsung."

You can easily notice that the person posting that is microsoft astroturfer who wants us to believe that Tizen will not be a threat to Microsoft but...
NO ONE WANTS A WINDOWS PHONE!

[baron99]

Not my comment above. This is the real baron99 ..but the fake baron99 is correct that NO ONE WANTS A WINDOWS PHONE!