Search giant Google Inc. GOOGL has officially launched its much-anticipated wireless phone service named Project Fi in the U.S. and exclusively available on Nexus 6, which it developed with Motorola. The service will start next month and is at present invite-only. Users can sign up for the service on Google.
Project Fi
With Project Fi, Google is set to become a mobile virtual network operator or MVNO. An MVNO agreement would enable the company to sell wireless service under its own brand name even though it does not control the network.
The service is hosted through spectrum from the third- and fourth-largest wireless carriers in the U.S. — T-Mobile TMUS and Sprint — and it will resell its service on their networks. The service enables subscribers to easily shift between cellular and Wi-Fi signals to control data use and keep phone bills low and also between the masts of competing mobile phone networks, as the phones search for the best signals.
Also, phone numbers in Project Fi will be stored in the cloud, which will allow users to text and place voice calls from a laptop or tablet without the actual phone nearby.
Pricing
Project Fi is a pay-as-you-go service, that is, users will have to pay for what they use. Project Fi will cost $20 per month for a basic plan, which includes unlimited talk, text, Wi-Fi tethering and international coverage in more than 120 countries. The Fi service offers inexpensive features like unlimited international texting.
Users will have to pay an additional $10 monthly fee for 1GB cellular data, $20/month for 2GB, $30/month for 3GB and so on while in the U.S. and abroad. Users will get reimbursed for the unused data. Charges are same for international users.
The Pros & Cons
Currently, Verizon Communications Inc. VZ is the leading U.S. carrier, followed by AT&T Inc. Google’s decision to operate as an MVNO and its capacity to successfully penetrate new regions to exploit emerging opportunities could be disruptive for the market. Moreover, Google's plans are cheaper than the regular plans offered by these two carriers, which could give it a competitive edge.
But both carriers have larger network coverage than T-Mobile or Sprint. So the service may not see high adoption rates despite the low prices.
Again, the service for the time being is only available on Google's flagship Android phone, Nexus 6 because the phone works with a unique SIM that enables users to access multiple networks and has a state-of-the-art cellular radio tuned to work with different network types. So no other popular phones from Apple AAPL or Samsung will be compatible with the service as of now.
While it is expected that Google will step up its efforts to lure users to its Android mobile-phone software, this move in itself will not do the job,
Moreover, depending on how it fares in terms of adoption and revenues, the service could expand further, at which time these wireless providers may be moved to lower prices.
But then again, it would place Google in direct competition with some of the carriers that sell and promote its Android mobile-phone devices.
Also, while being an MVNO would save Google from spending huge sums on buying airwave licenses and creating a national network from scratch, the facility comes with its own risks. Since Google is basically reselling access, it will have to absorb any increase in prices that the carriers decide upon. .
Google currently holds a Zacks Rank #4 (Sell).
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