Google Mobile – a wolf in wolf’s clothing?

  • Posted by Keith Willetts
  • January 27, 2015 11:52 AM GMT
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The latest move by Google to launch as virtual mobile operator in the US may prove to be a turning point in the relationship between operators and their retail customers, hastening the much feared ‘dumb pipe’ future. I speculated on such a scenario in my book,Unzipping the Digital World’ although at the time, I thought it might be Apple who might make the first move.

Cloud applications iconsToday, making phone calls is just one of many capabilities of a smartphone and increasingly the customer’s affinity is with the software environment and applications they use, not who provides the airtime and switches the calls. Add that to the legendary poor customer experience from most phone companies and the loyalty to the network operator for is getting more and more diluted.

With around 80% of the market for smartphone operating systems through Android; a smart digital store in Google Play; free-to-use services such as email and storage plus a great customer service reputation, Google is in a strong position to become a mobile ‘one stop shop’.

Virtual operators (MVNO’s who run their service on somebody else’s network) have traditionally struggled to make money as they are squeezed between market forces and wholesale prices. But Google has pioneered the art of making money indirectly – it doesn’t necessarily need to make big returns from mobile contracts because it can monetize users through other sources, such as advertisers. But being the mobile service provider allows Google to provide a completely joined up set of services and to fully control the customer experience end-end.

So where does that leave the network operator? Exactly where the name implies – operating the network but on a wholesale basis, shorn of a direct relationship with the customer and ultimately heading towards just providing ‘dumb’ access.

OK, so it’s a big extrapolation from an announcement of something that Google might launch a year from now and only in the US - many countries don’t even allow MVNO’s to operate. And as we’ve seen with many Google innovations, like Google Glass, they fizzle out pretty quickly. But relying on your competitor failing, or even worse, the government protecting you is a pretty thin corporate strategy.

The logic of Google making this move, and in multiple countries, is compelling – they don’t have to spend billions on spectrum and equipment, they just buy the airtime as they need it, where they need it and ‘pay as they grow’. They have enormous reach into the global marketplace, are technically and operationally smart, have great brand; loyalty and plenty of money. Apple and Facebook too could well follow this move and Apple’s dabbling with soft SIM technology is an insight into its thinking along the same lines.

Imagine being a network operator where the retail market gets controlled by a few global behemoths like Google and Facebook who have billions of customers world-wide. The network operators would be so desperate for the wholesale business that they would cut prices to the bone and then some.

That sounds very much like a low margin commodity operator future to me where the only way to survive is massive economies of scale and superbly efficient operations. And we have a long way to go to meet both of those criteria.

Watch this space.

Keith Willetts is the founder of industry consortium, TM Forum and a regular writer and consultant on the digital world.