Project Fi

Google recently launched Project Fi. Basically, this makes Google a mobile operator like Verizon Wireless and AT&T.

However, there’s an important difference between Google and other mobile operators. Rather than build out its own network infrastructure and license its own spectrum, which would be very expensive, Google is offering wireless coverage over the existing networks of T-Mobile and Sprint. In addition, it’s using existing free WiFi networks where available. This is key as it reveals Google’s long term strategy.

Imagine if everyone made their WiFi network freely available for the use of others. Users wouldn’t need to pay for wireless coverage. We could simply hop onto existing WiFi networks at no cost.

Other companies have tried to make this happen in the past. However, they haven’t been successful. The problem is that you’ll only make your WiFi available to others if they do the same for you. As a result no one does it.

Project Fi is Google’s attempt to solve this problem. Although Project Fi is limited to Nexus6 smartphone owners right now, its low subscription prices relative to mobile operator plans clearly signal Google’s end goal. Google believes that voice and data plans should be free for all mobile users and is taking steps to make this happen. By showing Project Fi subscribers that the more free WiFi networks are available on the platform the lower their subscription prices will be, it hopes to get more people to freely share their WiFi networks with others.

Because of the big risk that Project Fi presents to mobile operator revenues, Verizon Wireless and AT&T, the two largest mobile operators in the US, are not participating in the project. They have little to gain in terms of new subscribers and a lot to lose from their existing subscribers switching away to lower priced plans. T-Mobile and Sprint, the smaller operators, are participating because they believe that Project Fi will help hem acquire new customers. In the short run, this is true.

However, if Project Fi is successful in giving T-Mobile and Sprint new customers, it will also have been successful in showing Project Fi subscribers the value of free WiFi networks as an enabler of lower priced voice and data plans. The number of people making their WiFi freely available to others will increase and this will hurt all mobile operators. In their search for a short-term win, T-Mobile and Sprint are gambling with their long-term future.