Google a possible future MVNO in Australia and what it means for consumers

Intro – 60 second guide

Here are the key findings from the recent news that Google could be an MVNO in Australia, there are more details in the article below.

  • When breaking into the Australian market Google might choose a lesser major carrier such as Vodafone, to partner with and offer consumers competitive prepaid plans.
  • Google is known to be a disruptive brand in all of the markets which they enter, this is no doubt bound to happen in the Australian prepaid mobile market as well.
  • The Google business model consists of getting users to spend more time using their products. As an MVNO, this is another logical extension of their existing business model.

Google preparing to launch in the U.S

In the news this week it has been reported that the internet giant Google is working on and about to launch an American MVNO service. While it has been known for some time that Google has ambitions of tackling the U.S telecoms market, this is the first time that confirmed news has been reported on the topic.

Amir Efrati from ‘The Information‘, a website which reports on the technology industry, reported that :

“Google is preparing to sell mobile phone plans directly to customers and manage their calls and mobile data over a cellular network… the new service is expected to run on Sprint and T-Mobile’s networks…a launch this year seems likely”

This news has been quietly confirmed by Google and printed in the Wall Street Journal along with their own analysis of this announcement.

So what does this mean for Australia ?

Standard MVNO’s are all about providing deals where major telecom companies fail to address certain market segments. They do this as either the major network providers can’t provide access or are simply not interested in doing so.

This allows MVNO’s to cater to these profitable markets and compete on distribution, brand and pricing points. MNO’s do deals with MVNO’s as it suits them to do so, helps to increase their own market share and does not undermine their existing profitable businesses.

Currently in Australia there are three major network providers which are Optus, Telstra and Vodafone, which provide network coverage to the smaller MVNO’s.

With Google in the future entering the Australian market as an MVNO, it will require them to work in partnership with on of the above mentioned national carriers. The problem is that all three have a business model which Google can easily threaten.

What could possibly happen is Google making a deal with the smaller of the three national carriers, either Vodafone or Optus. This would then allow the carrier to grow their market share by partnering with a tech company which is known for disrupting industries it enters.

By making a deal with a cashed-up Google is not unrealistic when you think about it, as it would give consumers more choice and change the marketplace forcing Telstra to be even more competitive on their prepaid mobile plans.

How would Google benefit from this ?

Google would be planning to offer mobile phone prepaid plans to their customers and could be offering incentives such as discounted Nexus phones, or discounts on their Google cloud storage service.

It’s important to keep in mind that Google is a massive company with a long period of experience in catering to end users and delivering the services which they need. At its most basic level, Google will be able to leverage their existing consumer base to promote their mobile plan offerings to.

It will allow Google to show people more advertisements which are in line with their basic core business model and allow Google to capitalise on more “screen time“, which will only result in increased revenue for them and their partners.

While the current news coming out of the U.S is exciting and has the potential to really increase competition here in Australia, the bad news is that a Google MVNO in Australia is still quite a while off from becoming a reality.

It is even more likely that in Australia we end up with Google Fiber, long before their MVNO offerings hit the marketplace.

Mobile World Congress trade show

Google’s head of product Sundar Pichai was quoted as saying at the MWC event :

“It’s a very small scale compared to the rest of the OEM industry, but it pushes the needle. I think we’re at the stage where we need to think of hardware, software, and connectivity together. Especially with things like watches. We don’t intend to be a carrier at scale, and we’re working with existing partners. You’ll see some of our ideas come to fruit in the next few months that the whole android strategy is set around partnering.”

How will the major carriers react to Google MVNO ?

With Google’s entry into the mobile prepaid plan business, it will be sure to create massive headaches for an industry already struggling competing prices and soaring costs due to increased usage of the wireless spectrum.

In the US, mobile service company Sprint are betting that the increase of new subscribers thanks to Google will outweigh the risk that Google will become a major player and expand even further.

Google has a reputation as being a disruptive company and this has got to have executives at Sprint getting worried. By allowing such a large rival through the gates and into the industry, it could put a big dampener on their annual revenues.

While Google through their Android OS has a large market share of engaged consumers, the Google-branded Nexus might become even more competitive against the other industry leaders, Apple and Samsung.

Summing up

Google’s Project Fi was claimed (by Google) to be a way of stimulating innovation in the Telecom industry, which is a notoriously slow-moving beast. They have done similar things with Google Fiber where they instigated competition by rolling out fiber broadband connections in a number of US towns causing the major telcos to match them.

Generally, it appears (perhaps unsurprisingly) that Google’s intention are to:

1. Get people on the internet for longer
2. Own every experience they have on the internet.

That might sound obvious but to most people asking them why Google are making a self-driving car, they would respond to you “I don’t know.”

When viewed from the point of view that Google wants you to spend longer online, the only time people aren’t looking

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.