Google's new wireless service could propel industry changes - San Jose Mercury News

MOUNTAIN VIEW -- Google waded into the wireless business Wednesday, introducing a new service called Project Fi that champions better connectivity and cheaper rates for mobile-phone users in the United States even if it won't make much money for the search engine giant.

Google's most intriguing innovation is what it calls its "network of networks" enabling phones to automatically tap into the strongest signal, be it a free Wi-Fi hotspot or the cellular towers of the two carriers, Sprint and T-Mobile, that Google has partnered with in a bid to challenge behemoth carriers Verizon and AT&T.

That technological advancement -- and Google's unique pricing plan that pays users back for data they don't use -- could spark long-term improvements in wireless service but probably won't upend the industry.

FILE - In this Tuesday, March 23, 2010, file photo, the Google logo is seen at the Google headquarters in Brussels. Google is about to change the way its

FILE - In this Tuesday, March 23, 2010, file photo, the Google logo is seen at the Google headquarters in Brussels. Google is about to change the way its influential search engine recommends websites on smartphones and tablets in a shift that s expected to sway where millions of people shop, eat and find information. The revised formula, scheduled to be released April 21, 2015. (AP Photo/Virginia Mayo, File) (Virginia Mayo)

"Google's angle seems more aimed at driving change than dollars," said Colby Synesael, an analyst for Cowen and Co.

He said Project Fi's greatest impact -- and Google's likely intent -- will be that "other carriers will start to mimic certain aspects of the service."

Those services include automatically connecting to about a million free Wi-Fi hotspots, encrypting calls, making phone numbers "cloud-based" so they can be used on any Internet-connected device and allowing customers to make a Wi-Fi voice call.

Among the new service's most enthusiastic boosters Wednesday was one of Google's partners, T-Mobile CEO John Legere, who wrote in a blog post that "anything that shakes up the industry status quo is a good thing."

"The carriers have dug in their heels and held U.S. wireless back for too long," Legere wrote. "This industry needs all the fresh blood and fresh thinking it can get."

But Project Fi will be available only on Google's Nexus 6 smartphone, a limitation that hampers its effect on the wireless marketplace.

"For now, you have to have a $649 Nexus 6, which I think will keep a lot of people from using it," said Derek Turner, research director at consumer advocacy group Free Press.

But Google also has a reputation for transforming small-scale experiments into industry-altering advancements. Its high-speed Internet business, Google Fiber, had a clunky start but propelled enough consumer excitement to scare rivals such as Comcast into rolling out faster connections.

AT&T's chief financial officer, John Stephens, shrugged aside any concerns AT&T's shareholders might have when asked about Project Fi during an earnings call Wednesday.

"I understand it's got a very limited number of devices," which is not how AT&T approaches new ventures, he said. Verizon's chief financial officer made similar comments and called Google "just another carrier" when rumors of the planned wireless service emerged earlier this year.

The number of Americans who carry the Nexus 6 phone is "minuscule," less than 1 percent of all Android smartphones sold, according to Stephen Baker, vice president of industry analysis at The NPD Group, based in New York.

That makes Project Fi more of an experiment than a real business venture, Baker said.

"It's a really small impact," Baker said. "It's a demonstration of what people can do, what the technology can do, as opposed to a new business that's going to undercut the carriers."

By inking deals with Sprint and T-Mobile, Google has become what's known as a mobile virtual network operator that will sell the wireless service it buys from the carriers. Project Fi's plan will cost $20 for basic voice and texting and an additional $10 for every gigabyte of data. At the end of a month, customers who don't use all that data get a refund for what they didn't use -- a sharp move away from the unlimited plans that have become the norm.

"It's a baby step and hopefully more things like this will catch on," said Turner, of Free Press. "If that model is adopted by the carrier partners that Google is using, and further adopted by the primary carriers, that's great news for consumers who will be using what they pay for."

The service is so far available by invitation only. Those who express interest on Google's website are told they will get a response within 30 days. The earliest invitations will go to consumers based on the network access in their ZIP code and how ready it is for the new service. A map on Project Fi's website shows connections will be available in most urban and suburban regions of the United States, with gaps in rural areas and sparsely populated states such as Montana.

Contact Matt O'Brien at 408-920-5011. Follow him at http://ift.tt/1zqPxBg.



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