Every five to ten years, the wireless industry transforms itself. Eight years ago the Apple Inc. (AAPL) iPhone and Google Inc. (GOOG) Android hit the streets and changed the economics of the entire industry. Now Google wants to enter the wireless space in a deal much like Tracfone. So will Google transform the wireless industry next?
This is a very interesting deal, because Google does not typically enter a space unless it intends to transform and lead. So how could Google impact the wireless space in the United States? Let’s take a closer look.
Wireless the Google Way
First, Google will not be building out it’s own wireless network like AT&T Mobility (T) , Verizon Wireless (VZ) , Sprint (S) or T-Mobile (TMUS) . Instead, Google will resell the networks of Sprint and T-Mobile. This is similar to the way Tracfone resells AT&T Mobility today as an MVNO competitor.
Today, Tracfone is the fifth largest wireless competitor and they are an MVNO reseller.
That said, Google has the opportunity to be as successful as Tracfone - a huge opportunity. The first company to be planting it’s boots could indeed be Tracfone if Google will be offering lower priced services in an upscale way.
If Google passes Tracfone, their next goal will likely be to dominate the wireless space in general. That means they will be focused on competing with AT&T Mobility, Verizon Wireless, Sprint and T-Mobile.
Could Google dominate wireless? That’s a stretch to say the least, but who knows in this crazy business. If they market well, they could have an impact. "How much of an impact?" is the real question.
A History of Failed Wireless Plays
Other major companies have failed to successfully enter the wireless space. Companies like Comcast Corporation (CMCSA) , Time Warner Cable Inc. (TWC) , Cox Communications Inc. ($COX), Facebook Inc. (FB) and Amazon.com, Inc. (AMZN) have all tried and all failed so far. What makes Google think it can succeed in this very tough business?
It’s also important to note that carriers like AT&T Mobility, Verizon Wireless, Sprint and T-Mobile have two sides to their business model: First, they retail services to customers, and they also wholesale services to other networks that compete with them.
So even if Google is wildly successful, that will just make the traditional carriers they do business with wildly successful on their wholesale side...shifting market share and dollars from one column to another. However, the companies could all still remain in a leadership position.
To start with, Google is working with Sprint and T-Mobile, but over time, they could just as easily move between carriers including AT&T and Verizon. This is a big potential opportunity for Sprint and T-Mobile.
That is, if Google is successful. Is this a guarantee? No it’s not. Google is a company that likes to throw lots of new ideas against the wall. Only a few actually stick... usually those they start building.
Google's History of Abandoned Projects
Google Health was an example of failure. Google pulled the plug. Google Fiber is another example. They are offering high speed Internet service in a few cities and customers seem to like it. You would think this would be successful and they would rapidly roll this service out to every other city in the United States, right?
Well they are not. They are slowly rolling this service out, and in fact during the last few weeks said they are taking a breather to think things through. Does that mean they are going to continue with Google Fiber? Is this a way for Google to raise the level of interest? Will they change their strategy? Will they exit?
Lot’s of questions, but no answers. Google is involved with so many different and exciting ideas, however, only a very few of them are commercially viable at this point.
So what’s the ultimate Google goal here? Is it to really become a wireless competitor? Is it to buy a network if successful? Is it to put pressure on the existing structure to reduce prices to consumers? Is it to increase speeds?
You also have to ask "Why?" Is there a need? It’s not like customers complain about today’s wireless world. Customers are happy with all the innovation and speeds. Sure they would like to save money, but that’s a double-edged sword, as carriers continue to invest billions to bring the advancements users really want.
So the choice is clear: Low cost with little innovation, or higher cost with advanced innovation? There are customers on both sides, and there are competitors on both sides.
Where is the Need for Google in Wireless?
Does Google think they can win with their killer brand? Perhaps. Has Google thought through all the failures from non-wireless companies mentioned earlier?
So Google wants to provide low costs and high innovation. How is that going to work? We don’t really have a clue yet. We’ll just have to keep our eyes open and on Google, and see what they actually do next. This potential disruptor is definitely something competitors should be keeping their eyes on.
So we’ll just have to wait and see if Google makes a real splash in the wireless marketplace, or if they are a complete and total failure. Stay tuned.
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