Google will use partners' infrastructure to launch a wireless service but wants to use the network to help it sell other innovative services.
Putting weeks of speculation to rest, Google on March 2 confirmed that it would soon launch a wireless service, using network infrastructure from other service providers.
Several media reports quoted Google Senior Vice President Sundar Pichai as announcing the plans during a keynote address at Mobile World Congress in Barcelona, Spain. Phones on the Google network will use both WiFi connections as well as cell towers to communicate, one of the reports noted
Google's goal in launching the service is apparently not to become a major network operator. Rather, it plans to use the network as a base on top of which it will launch other innovative services.
Pichai's comments come weeks after The Wall Street Journal first disclosed
the company was looking to buy wireless services in bulk from T-Mobile and Sprint. Google plans to resell the services under its own brand under a so-called mobile virtual network operator (MVNO) agreement with the carriers, according to The Journal
report, which cited sources close to the deal.
The goal apparently is for Google to be able to offer wireless services without having to spend money on building out and maintaining its own network infrastructure. Others offering services under similar MVNO arrangements include Virgin Mobile, Tracfone Wireless, Straight Talk and Boost Mobile.
A Google spokeswoman said Google would announce more details on its initiative in the coming months. "We are working on projects designed to help make access ubiquitous and more seamless for people," she said. "Across all of them is a strong element of collaboration with carrier partners, as we believe no one company can tackle this problem alone."
Gartner analyst Bill Menezes sees Google's wireless plans as another bid by the company to ultimately drive more people to its core services like search, YouTube and the company's other Web properties. By owning the network, Google is in a good position to prioritize its own services.
Google will use its wireless service to deliver innovative hardware and service bundles, Menezes said. "They have a lot of flexibility on how they package this service," he said. "They don't necessarily have to sell it the way the incumbent carriers do."
For example, Google could begin selling devices that have wireless service bundled into it much like Amazon's Kindle, he said. The company could factor in the cost for such bundled services in the up-front price of the product, he said.
As an MVNO, Google's operating margins will likely be a whole lot slimmer than usual. But the focus really is not on Google becoming a wireless player but on better enabling access to its core revenue- and profit-generating services.
"The easier they make it for consumers to connect to its services, the easier it becomes for them to make revenues," Menezes said.
It is possible that, once Google familiarizes itself with the industry, the company might decide that an MVNO presence is not enough and buy a smaller wireless provider outright, he said.
Though Google itself is likely to be a small player in this space for the immediate future, partners like T-Mobile and Sprint stand to gain quite a lot from having Google purchase excess capacity from them, Menezes said. Google's presence in the wireless space could also spur the incumbent providers into launching new services in much the same way that Google Fiber has pushed AT&T to ramp up its gigabit Internet offerings, he said.