Google’s investments in the telecoms sector might suggest that it is building a global telecoms network that will compete head-on with telecoms operators. It is a major investor in international fiber networks and operates nearly 50 data centers on four continents. It has a global content delivery network that reaches more than 100 countries, a fixed (fiber) network operation, an MVNO business, and the dominant operating system for smartphones. However, it seems unlikely that it has a single, coherent strategy that ties all these “telecoms” businesses together. Many of its initiatives can and should be viewed as opportunities for operators and their suppliers to better serve their customers.
Given that telecoms underpins the digital economy it is only to be expected that there will be different competing “telecoms” projects within the organization. The company often uses its investments in new products and services to kick-start the wider market. For example, it is unlikely that it wants to be an automotive OEM, but it would like driverless cars to reach commercial production and eventually the mass market. This is partly because of the benefits that this could bring to society and partly because of the role that Google could play in the software that will manage the driverless-car ecosystem.
Google's Telecoms Investments
Google’s investments in “telecoms” fall broadly into two categories: assets that are core to its business and initiatives that do not directly support its core business. The former are designed to help design, store, and transport its digital content around the world as efficiently as possible. The latter – which include Google Fiber, Google Fi, and Project Loon – are designed to help overcome specific bottlenecks, blockages, or market failures.
Google announced Google Fiber in 2010 but it did not launch commercial services until 2013. The initiative is innovative because at the time no other telecoms operator was offering a 1Gbps symmetrical network and service.
Google Fi, the company’s MVNO project, is designed to address the fact that mobile operators do not generally allow their customers to roam onto each other’s networks. It has long been a curiosity of the mobile business that someone who is roaming from another country gets better coverage than a domestic user because their device can connect to any available network. Google Fi allows customers to access the Sprint and T-Mobile networks and it is likely that Google will, in the future, approach other operators. The initiative has the potential to disrupt the roaming business and offer cheaper calls and data for travelers between Europe and the US. Google has been holding talks with a number of players to offer Google Fi in Europe and the use of new reprogrammable SIMs would allow it to bypass the international roaming regime.
Project Loon is a research and development project that aims to provide Internet access to rural and remote areas using high-altitude balloons placed in the stratosphere. Bringing the Internet within the reach of people in remote areas and less-developed countries is a passion for many, but progress has been slow. Project Loon represents a more radical approach to reducing the cost of connectivity.
Other Google Investments
Google has not publicly stated that it is investing in fiber, MVNOs, and balloons to stimulate the market – or that it does not harbor long-term ambitions for these initiatives. However, Ovum believes that this is the case. Telecoms simply does not offer the same returns and growth potential as Google’s core business. The launch of Google Fiber has provoked a competitive response from established telecoms operators and, if Google Fi is successful, we can expect to see other players entering the multi-network MVNO business.
It is interesting to speculate on what other issues Google could seek to address through investments in telecoms. The adoption of “mobility” solutions in the healthcare, education, and transportation sectors is both a challenge and opportunity, as is the broader Internet of Things. But there may be other, more specific roles and opportunities. The emergence of small cell architectures that will boost urban coverage and capacity is being held back because of the high cost and complexity of siting and backhauling radio networks. It does not make economic sense, in a multi-operator market, for each operator to roll out small cell architectures in its own. Google may have a role to play here.
Analysts at Ovum spend a lot of time tracking the relationships and partnerships between telecoms operators and companies such as Google, Facebook, and Apple. Apple’s motives, strategies, and business dealings have become pretty clear and Facebook has a transparent approach to partnerships, particularly around initiatives such as Free Basics (formerly internet.org). However, Google is harder to pigeonhole because of the sheer diversity of its activities. Some of its projects may be disruptive to different parts of telecoms operators’ businesses, but it does not have a telecoms master plan.
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