What Hath Google Fi Wrought?

Google has unveiled its long-awaited MVNO offering, Google Fi.  Right now, Fi is in what Google calls “Early Access” so you have to apply for an invite and wait to get it.  It might be worth the wait.  Working in partnership with carriers in over 120 countries (Sprint and T-Mobile in the US), Google has put together a pretty jazzy cellular/WiFi combination that’s integrated with Hangouts (Google Voice) and offers a novel and attractive pricing plan.  It might be a game-changer in the mobile broadband space.  It also might be another DOA concept like Google Wave.

Fi’s pricing is probably the most obvious differentiator and disruptor.  A month’s service ranges from an improbable-alone base of $20 for talk/text, and an additional $10 per gig of data.  The Google plan seems to start with 3 gigs, making the price $50 per month.  You get a rebate for what you don’t use and you can buy additional gigs for ten bucks.  That puts the service price on par or better with respect to most other prepay plans, and much cheaper than traditional post-pay plans.  Fi is post-pay, so it’s probably a price leader in that space for many users.  With service in over 120 countries at reasonable rates, international travelers might find it especially compelling.

Seamless WiFi calling is another plus.  Fi selects the best/cheapest option for connection for a given call, so you don’t have to do anything to make a WiFi call other than be somewhere where public WiFi is available.  That works in the US or internationally.  I have to note that there is seems to be a conflict between Google’s blog and the Fi pages on how WiFi works.  The blog and broad marketing material suggest it works “…whether in your home, your favorite coffee shop or your Batcave”, which would imply that you can register it on secure WiFi networks since most home networks at least are secure.  The Fi FAQs say that the WiFi network has to be an open public network without entered security.

Fi is tightly coupled to Google’s current communications frameworks, once Google Voice now Hangouts.  When you sign up for Fi with a Google account, the Hangout options associated with that account are updated to include the Fi handset (a Nexus 6 is all that’s supported initially).  You can make Fi calls using any other device that’s also linked to the account’s Hangouts profile, and receive calls made to the Fi number on any other device as well.

For a lot of users the Fi offering will be pretty significant, but it’s not for everyone.  Unless you happen to have a Nexus 6 you’ll have to wait until your device is supported or buy a Nexus 6 or other supported device (of which there are none for now, as I’ve noted, so this means only a Nexus 6 for now).  That’s a six-hundred-buck buy-in.  There are no family plans or unlimited data plans either, so people who save a lot with combination plans or who use a lot of data may end up paying more with Fi.  Fi doesn’t pay termination charges either, so switching could be costly even if you can salvage your phone.

The obvious question raised by Fi is whether Google is serious about it, and there’s obviously no answer to that one.  You have a better chance of being able to get Google Fi than Google Fiber, but it’s far from 100% and even if you get it, there’s a chance it might go away.  For “Early Access” read “field trial?”  I suspect that Google is reserving the right to pull the plug during the Early Access period, and even change terms.  I don’t think they’re likely to do either, but it’s possible.

The uncertainty over how serious Google is about Fi extends to cloud competitive responses.  Sprint and T-Mobile are unlikely to jump out to undermine the Google offering since they’re hosting it in the US.  Verizon, AT&T, and the other current MVNOs may stand by for a real national offering to be made rather than to respond to what’s obviously a trial.  In a pricing/offering sense, in fact, I think that may be likely.  In a feature sense I’m not so sure.

Integrated, seamless, roaming between WiFi and cellular is long overdue as a service feature, and Fi will likely accelerate recognition that this is an important feature.  Roaming among operators may also be encouraged just because Fi could otherwise make a big dent in the international traveler market.  Integration of multiple devices—the “virtual phone number”—is also I think a likely outcome of Fi even if Google eventually pulls the plug on it.

What if Fi takes off, though?  AT&T and Verizon will be looking hard at the subscriber stats once the service goes out of its Early Access phase, and at the first indication that there might be serious competition from Fi, I expect these two giants will step in.  Both are experiencing some ARPU erosion for wireless services, in AT&T’s case primarily due to cannibalization by its multi-party plans.  On one hand they don’t want to start a race to the bottom on pricing, but on the other hand they know that 1) they are network operators not MVNOs and so have all the pie rather than a piece, and 2) their low IRR means they could underprice Google if they had to.

Underneath Fi may be the important thing.  It’s a service platform, albeit a currently limited one, that rides on a federation of networks.  In many respects it’s a bit of what Alcatel-Lucent’s Rapport could be used to build.  The platform has to realize any goals Google has to build/socialize a revenue ecosystem on top of Fi, and the fact that there’s a conceptual platform competitor out there a day before the Fi announcement means Google will have to work hard to make Fi more even than it is now.  That, when financial caution may be holding them back.

“Contextual” was Alcatel-Lucent’s tagline and it should be Google’s, but both will have to build some proof points to validate the contextual potential they offer.  There’s limited presence built into Fi through Hangouts.  There’s great potential for building in other such features, and it’s this potential that should be driving Google and striking fear into competing giants like AT&T and Verizon.

Another risk posed by Fi is that mobile services over pure hotspots might emerge, which could create a major price competitor to traditional prepay and post-pay plans.  It’s possible to use smartphones with only WiFi service, but hot-spot-hopping could be limited and difficult.  With Fi you could get enough roaming capability to make WiFi-only a possibility.  Even Google could offer that down the line, and at the least WiFi roaming would likely cap data rates competitors would be able to charge.  That would almost guarantee lower ARPU as time passed.

I think the architecture challenge posed by Fi is the most compelling.  Operators have talked a lot about agile services and NFV agility, but few have really thought about creating a consumeristic competitive ecosystem.  My own experience with Verizon’s business voice and residential IP voice was negative enough to push me to another approach, one that has included Google.  You could argue that Google Voice/Hangouts would have made a significant impact had Google pushed legacy adapters for the service and had it been more directed to the mobile user.  Fi fixes the latter, and this may be the factor that forces operators to look at ways to finally build agile services above connectivity.