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What the US Mobile Fiasco Says About Google Fi

The humbling of an upstart little virtual carrier shows why Google isn't getting more ambitious with Project Fi.

By Sascha Segan
February 5, 2016
Google Project Fi

Alphabet was briefly the most valuable company in the world. You'd think it would do anything it wanted to, but there's one thing it can't do: upset the U.S. wireless carriers. That's why you aren't going to see Google's Project Fi expand much beyond what it's doing now.

Opinions There are four major wireless carriers in the U.S.: AT&T, Sprint, T-Mobile, and Verizon. If you want to start your own service, you can start an "MVNO"—a virtual carrier that uses one of those networks. Maybe you'll also lean on Wi-Fi a lot, like Republic Wireless does, but ultimately, you'll need to make an MVNO deal. There's no way around it—there just aren't enough GoTennas in the world to fill in the big gaps between Wi-Fi networks.

Your MVNO deal will have specific terms. But it'll also have unspoken terms. That's what upstart US Mobile ran into this week, as its CEO Ahmed Khattak inadvertently tested T-Mobile's patience with a very loud, public rollout of Xiaomi and Meizu phones.

In US Mobile's case, Khattak got a call from someone at his enabling carrier—which, for contractual reasons, he never actually says is T-Mobile—saying that they wanted those phones to go through some additional testing. Khattak didn't have to comply, of course, but it's generally not a good idea to be on the wrong side of the folks providing your network service. Things could happen. So US Mobile is doing what T-Mobile strongly suggested it do.

Nice MVNO, Wouldn't Want Anything to Happen To It
And so we get to Google Fi. It combines Sprint, T-Mobile and Wi-Fi, and is a technology demonstration of how Google can intelligently knit together heterogenous networks and get all the handoffs and billing straight. From the Sprint and T-Mobile perspective, it may also be an experiment at seeing whether roaming on each others' networks makes a good nationwide alternative to having to roam onto the larger, but more expensive AT&T and Verizon networks.

But Fi can't go from being a beta to becoming a revolution. The biggest virtual carrier, TracFone, was allowed to get so big because it's seen as serving a low-income market that the major carriers otherwise wouldn't be easily able to tap. (TracFone also has at least one weird, old contract that couldn't be duplicated today, insiders have told me.) Other MVNOs tap into other niches, such as people who do a lot of international calling. Remember that Boost, Virgin, Cricket and MetroPCS aren't virtual carriers; they're just parts of the big guys.

Fi customers, as owners of expensive phones who use a lot of data, are generally pretty high-revenue users. The carriers don't want to lose those users from their own more expensive postpaid brands, so they're only willing to let Google try its experiment up to a point. I wouldn't be surprised if there was a maximum user figure built into Google's MVNO contract, after which the rates it would pay to T-Mobile and Sprint would get much higher. Even if there isn't an explicit rule, there's almost certainly an unspoken agreement.

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It's actually easier to build an ISP than a wireless carrier, because mobile phones move. Google Fi can go city by city. WISPs such as Starry could even roll out neighborhood by neighborhood. But with a wireless carrier, it's either go nationwide, or you're stuck paying through the nose to the big carriers for roaming. This is the painful math that has gobbled up every regional carrier other than U.S. Cellular.

All this goes to say that they who own the spectrum and run the towers make the rules, and you shouldn't look for a revolution from anyone who doesn't own their own spectrum and run towers. This also emphasizes why we can't let any of the big four carriers merge with each other: as there's nobody else buying nationwide spectrum and building out towers across the country, no truly disruptive upstarts will rise up any time soon.

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About Sascha Segan

Lead Analyst, Mobile

I'm that 5G guy. I've actually been here for every "G." I've reviewed well over a thousand products during 18 years working full-time at PCMag.com, including every generation of the iPhone and the Samsung Galaxy S. I also write a weekly newsletter, Fully Mobilized, where I obsess about phones and networks.

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