What Google’s MVNO Plans Could Mean for Operators

A number of independent rumor sources say that Google is finally going to make the MVNO move, striking reseller deals with Sprint and T-Mobile to become a Mobile Virtual Network Operator (MVNO).  This is what I thought Amazon should have done with its Fire phone, and what I still think would be a possible move for Apple.  It’s a move that promises to reposition Google in the network market, in the cloud, with advertisers, and with users.  One that threatens its traditional competitors and creates some new ones.

This isn’t likely to be a simple “make-more-money” play.  MVNOs are typically companies who offer lower-cost services with some restrictions or priority limits on access relative to the customers of their parent carriers.  Given that Sprint and T-Mobile are price leaders already it may be difficult for Google to discount much and still retain any profit margin at all.  That suggests that Google may have other plans to leverage the relationship through add-ons.  If not, if Google is looking at a “premium MVNO” that would charge more, they’ll still have to justify that extra cost somehow.

For the industry, this could be a radical move.  While other players like Amazon and Apple have not yet pulled the MVNO trigger, it’s likely that a move by Google could spur them to action.  Even if there’s no immediate response, the threat here is clear.  A major handset player (even an indirect one, via Android) and a cloud player and an ad giant becomes an MVNO?  A lot of carrier planners are going to get heartburn on that one, even if there were no other risks, which there are.

One thing at risk here is further disintermediation by handset vendors.  Most customers have as much or more loyalty to their devices as to their carriers.  Many mix service and device features up, in fact.  Operators have been increasingly concerned about the power of the device vendors, particularly Apple, in controlling service adoption and upgrades.  There was a lot of operator interest in Mozilla’s phone project, which was a lightweight platform intended to act as a portal to carrier-hosted features rather than be a device with a lot of local smarts.  It never took off, but it was an indicator that operators were taking handset vendors seriously, risk-wise.  They’ll surely be even more concerned now.

This is old news, of course, and what I believe will be the real risk here is at a higher level.  Mobile services, as I’ve pointed out before, are unique in that they reset the relationship between users and information by supporting what users are doing and not helping them plan.  You may research stuff online from your living room or den, but you make immediate purchase decisions from your phone—because it’s with you when you’re in a buying mode.  What I’ve called “point-of-activity empowerment” is a potential powerhouse new set of benefits, something that could drive almost a trillion dollars a year in new revenue.

With both Android and an MVNO position, and with content, ad, and cloud resources aplenty, Google could frame a bunch of new services targeting the mobile user.  Those services could help Google make a transition from being dependent on advertising (a two-thirds-of-a-trillion dollar space even if all forms of advertising are counted) to paid-for services that could bring in four trillion dollars or more in total.  They could also help operators monetize their infrastructure investment better, but not if Google gets the money.

The mobile/behavioral services tie in nicely with some of Google’s other interests, like self-driving cars.  These are gimmicks now but a lot of what would have to be behind the vehicles in the way of route knowledge and even IoT integration could be useful to human drivers and pedestrians.  There’s also a strong ad tie-in with integrating movement, social framework of the user, and their “intent” as expressed by questions or searches they launch.  All of this stuff could be the basis for a series of services, both to advertisers/retailers and to users.

A new giant MVNO like Google and the prospect for Amazon and Apple to follow suit generates a lot of potential changes in the mobile operator’s plans.  There are already examples being reported of MVNO grooming using SDN, and that would be more likely if big names like Google get into the game.  Even more radical changes could come in the IMS, EPC, and NFV areas.

Mobile service-layer technology has been overly complex, costly, and high touch.  Vendors like Metaswitch have already introduced lighter-weight technology for IMS that would be ideal for an MVNO, depending on the technical integration offered by the parent operators.  Google could base their service on a simpler stack.  Beyond these basics, Google would be likely to jump into a different voice and message model (think Google Voice and Gmail, perhaps, or Hangouts overall) and that would put pressure on operators to find a voice/SMS platform that’s more agile and cheaper.  If we find out that Google’s deal is for broadband/data only, we’ll know something very important—classical mobile voice and SMS is dead.

EPC is an issue because most of what EPC does is accommodate mobility and provide assured paths for premium services.  If Google takes a complete OTT voice and IM model, there’s nothing for EPC to do other than to follow users when they move from cell to cell.  Other location-independent routing approaches have been proposed; might Google try one?  At the least, we might be looking at a future where “Internet offload” offloads everything, which makes the concept a bit damp.

For NFV, this could be the goad that finally generates useful action or the straw that breaks the camel’s back.  Carrier standards processes have long missed the mark when applied to software-driven functionality of any sort, and the ETSI NFV work (with its first phase just completed and published) has a very powerful/revolutionary concept (MANO) that’s buried in a rigid and complex framework that doesn’t cover the full service spectrum in infrastructure terms and isn’t fully integrated with operations or applications.  Vendors at this point are certain to jump out to build around the edges of the spec to take advantage of the limited scope and to differentiate themselves.  In doing so they might propel NFV to a place where it could actually help operators build agile services—services to do what Google is likely now signaling it plans to do.

It’s my view that the Google move will propel SDN, NFV, application architectures for mobile empowerment, and a bunch of other things.  The propulsion will be focused on vendors, though, and not on the standards processes.  There is simply no time left now to diddle with consensus.  Once Google gets in the game, once Amazon and Apple are stimulated to accelerate their own MVNO positions, it’s every vendor for themselves.