The Information reported that Google will be launching an MVNO, reselling wireless service from the Sprint and T-Mobile networks. This has little chance of making a significant impact on the U.S. wireless market.
What is an MVNO?
To understand what Google is doing, it’s important to understand what an MVNO is. The acronym stands for Mobile Virtual Network Operator. These are companies that buy network service from companies like AT&T, T-Mobile, Sprint and Verizon at wholesale prices and then resell them to consumers at retail prices. Often, these prices are much lower for low-usage customers than the big brand names. The MVNO handles pricing, packaging, marketing, billing and customer service. (This is a simplification.)
Why do MVNOs exist?
There are three big reasons:
- Carriers suck at specialty marketing. Virtually all of carrier marketing is focused on the mass market. Going after smaller segments isn’t their thing. With MVNOs, they let someone else handle that. Consumer Cellular (one of my favorites) targets seniors. Tracfone targets lower income customers. Even retailers like Target (Brightspot) and Walmart (StraightTalk) have their own mobile brands.
- Carriers are focused on increasing ARPU, because that’s what Wall Street looks at. If you look at what gets marketed, it’s typically plans that start at $100. Their financials can separate retail from wholesale ARPU.
- Carriers have excess network capacity and want to make money for it.
What Google lacks
- Customer service. This is something that the company is not known for; although its service reputation isn’t nearly as bad as PayPal’s, it is a brand associated with little to no service. (To be fair, I had a great experience with Google Drive phone support.)
- Retail. Google has no retail experience to speak of. There is a reason there is a wireless company store or three every block in urban areas — it works! Even Apple has its own, highly lauded distribution network.
- Marketing. Having a hugely successful product with almost no marketing has resulted in Google’s almost complete inability to market products. See: Google Wallet, Nexus, Google TV, Google+…
Some have compared a Google MVNO with Google Fiber. Yes, both are in communications. But Google Fiber is bringing something unique to customers — extremely high speeds. A Google MVNO would have no such differentiation. Being on lesser networks would also make it harder to draw customers from the big two, substantially limiting the market.