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The East African : Feb 14th 2015
The EastAfrican OUTLOOK FEBRUARY 14-20,2015 e -AF R ICAN Google is now seriously taking on telecoms The fi≥m is eyeing a low-cost sma≥tphone and an ent≥y into wi≥eless se≥vice By BRIAN FUNG The Washington Post and advertising. Now Google is turning its attention toward telecoms — and it’s no experiment. In recent months, Google F has said it’s bringing ultra-fast Internet to at least 18 cities, including Atlanta and Nashville. It announced pilot tests of a low-cost, modular smartphone. The company has joined an influential lobbying group for upstart telecoms firms. And now Google is considering an entry into wireless services, as first reported by The Information, a technology news site founded by former Wall Street Journal reporter Jessica Lessin. All this adds up to what ap- pears to be a serious play in the communications space, with broad implications for what consumers will pay for service, how businesses will compete and even the regulations that affect how Americans experience their technology. Google did not respond to a request for comment for this article. Google’s investments in tel- ecoms pit the company against some of the largest voice and Internet providers around. But Google has a key advantage: It doesn’t make its money from Internet service subscribers. That’s why it should be able to drive down prices for consumers, to adopt business practices that would be unsustainable for other carriers and to influence Washington policy debates in surprising ways. “This is a multilayered strat- egy,” said Harold Feld, senior vice president for the consumer group Public Knowledge. “Even if Google only makes 10 per cent profit margin on its fibre and wireless offerings, that’s enough for it to be successful and to achieve the desired result of driving more use of its applications.” What made Google one of the world’s five biggest companies? Data. Specifically, the behavioural insights drawn from users of its free services, such as Gmail, YouTube and search. Information is the linchpin of Google’s business model, not paying individuals. The consequences of this strategy run deep and could reshape how we watch TV, shop online and connect to one another. If Google forges into the wire- less space, the search giant wouldn’t just be an alternative irst it conquered search. Then it was online video 33 An ethernet cable is seen at a news conference where it was announced that Google would provide free Wi-Fi to the Chelsea neighbourhood in Manhattan, New York City in January 2013. Picture: File to Verizon and AT&T. It would control a vertical slice of this universe in a way that no one else does. Google would reportedly offer wireless services by piggybacking on Sprint and T-Mobile’s networks — essentially paying those companies so that Google can resell their services under its own brand, according to a report in the Wall Street Journal. In addition, it would blend the two networks and allow its customers to hop between them depending on which carrier’s signal is strongest. Phones on the Google service would also be able to make calls over WiFi hotspots, meaning that at all times, devices would hunt for the best of three options. Combine that with its forth- coming smartphone, the Android operating system and the Google-owned apps that ride on top of it all, and you’d get a formidable silo of hardware, software and services. Not even Apple, with its famously tight grip on the iPhone, can claim so much control over the user experience. Playing Sprint off against T-Mobile — and vice versa — would be a clever move by Google, but it’s the WiFi call- ing that really promises to upend the industry. Google isn’t the only one with incentive to explore the technology; T-Mobile has offered the feature since 2007 as a backup to traditional cell service. And since 2012, an independent carrier known as Republic Wireless has offered a service that tries to place calls over Wi-Fi hotspots first before turning to the more expensive cellular network. Because placing a call over WiFi costs nearly nothing, some analysts believe it will one day undercut legacy wireless carriers, driving down prices for consumers. “Spend an hour with [Repub- lic chief executive David Morken] and you’ll leave feeling pretty bearish about the long-term prospects for wireless pricing,” said Craig Moffett, a telecom analyst at MoffettNathanson. “I would assume Google will borrow heavily from David’s model and rely overwhelmingly on WiFi, just as Republic has done.” The one drawback to calling over Wi-Fi? It’s not everywhere. But Google has a ready solution: Free public WiFi provided by Google Fibre. Cable operators have a similar idea in mind. Cablevision last month announced WHAT IT MEANS FOR SEARCH GIANT If Google forges into the wireless space, the search giant wouldn’t just be an alternative to Verizon and AT&T. It would control a vertical slice of this universe in a way that no one else does. Google would reportedly offer wireless service by piggybacking off of Sprint and T-Mobile’s networks — essentially paying those companies so that Google can resell their services under its own brand, according to a report in the Wall Street Journal. In addition, it would blend the two networks and allow its customers to hop between them depending on which carrier’s signal is strongest. Phones on the Google service would also be able to make calls over Wi-Fi hotspots. that it’s rolling out a mobile phone service that will run on Wi-Fi. And Comcast has floated the possibility of becoming a WiFi-based voice carrier. The cable industry is welcom- ing the chance to go head-tohead with Google. “Google’s expansion further demonstrates how America’s broadband marketplace continues to become more competitive and offers consumers a growing array of options for Internet access,” said Brian Dietz, a spokesman for the National Cable and Telecommunications Association. Unlike the cable industry, however, Google’s core business doesn’t involve running a massive network. Nor does Google need the best nationwide network to win, Moffett said. “Google’s strategy is to try to get just enough fibre deployed that they can achieve their strategic objectives,” he said. The more people it connects to the Internet, the more people use Google services — users who in turn generate more data for Google’s ever-hungry algorithms. Traditional telecoms stand in the way of those goals, analysts say. Many existing carriers have nudged consumers to adopt plans with monthly data caps, which are more lucrative for those companies. But Google benefits when consumers use more data, not less, said Walter Piecyk, a telecom analyst at BTIG. “I’m sure Google would prefer that fixed and wireless operators don’t ever cap usage or meter data,” he said. Encouraging more Americans to embrace broadband means going after the millions of poor, rural and minority households still to be connected to the Web. To that end, Google has offered to make Fibre available for free to schools and community centres, as well as to residents of public housing. Google isn’t subject to the same regulations as a Comcast or a Verizon. But its attitudes would probably evolve as its business interests — pertaining to telecoms, at least — begin to overlap. For instance, rules about phone records prevent telecom companies from sharing that data with third parties, unless the customer explicitly grants permission, or unless it’s the subject of a valid law enforcement request. If Google became a wireless carrier, chances are that — much like its industry bedfellows — it would want to use US phone records to further its core business. But Google may, by virtue of its stakes in other sectors, split from the rest of the telecom industry. We’ve seen this to some extent on net neutrality, a major policy battle pitting Websites against broadband providers. Recent statements from the company have provided ammunition to proponents of strong rules meant to prohibit Internet providers from speeding up or slowing down certain Web sites over others. For a company that ranks among the biggest lobbying spenders in Washington, Google’s arguments to policy makers carry a great deal of weight, which is also why the company’s entry into the telecoms space would be significant. Even as big players in the industry move to consolidate, Google could stand to be the spoiler for these companies.
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