Google’s strategy are many a times layers of intentions well crafted not only to boldly assert stance, but to equally give an indication to what will eventually “become”. You’ve got to give it to them, strategy wise, Google is smart at failing fast and as well commercializing quick. #Google glass opened the door for possibilities ranging from medical use to exploration, and finally in Jan 2015, Google announced it was rounding down #Glass in its current form. I mean to any one the question still remains, what does it mean to say you’re rounding down sales and focusing on “future forms of glass”. Well, to draw parallels, it was a similar thing that happened with the Google Nexus G (http://en.wikipedia.org/wiki/Nexus_Q). This was a revolutionary little object with the capability to transform living room play. Google invested into R&D and production of the units, handed down couple of them to developers during 2013 Google I/O and rapidly failed the project only to debut in 2013Q4 with a renewed, simplified and even more powerful products to replace the Nexus Q – #Chromecast and Android TV. It wasn’t a failure that led to the round-down of Nexus Q, it was an eye opener. An eye-opener that led to an immediate re dimensioning of the capability but still maintaining the strategy.
To understand Google’s inner-circle thing-tank on their latest bold strategy to embark on MVNO play, you’ve got to look at their past 5-year key initiatives. Start with Google Fiber, which is now a huge success by the way, and was arguably a hullabaloo when it started, as reported by Time Magazine in 2011, seen as a push to perhaps “shame the major cable operators into improving their service so that Google searches could be done faster”. Google failed to comment. Keeping steady on its commitment and indeed continuing to connect cities. In-fact, in January 2014, Kansas, there was a huge push legislatively (Senate Bill 304, referred to as the “Municipal Communications Network and Private Telecommunications Investment Safeguards Act”) to halt further expansions, which by the way as of February 2014, had lost momentum in the Kansas state senate, and the bill’s sponsor, Kansas Cable Telecommunications Association (KCTA), indicated that it is highly unlikely that it will continue to pursue the legislation in the current legislative session.
This is another well thought through strategy by Google to realize a universal access ecosystem. It’s an “Onion Strategy”. An Onion Strategy is a bold strategy made of layers of intentional fail points but failing for the intend reasons in order to deliver a sound and value proposition. Google wants’ to be your tomorrow Service Provider (tSP) and they know where the consumer space is heading. After all, everything is Software and Connectivity now.
It is no coincidence that Google now seeks to open up an aggressive and definitive stance into the Mobile industry through virtual operations models (MVNO). They have warmly extended their hands to MNO’s to say “we will partner with you and not go it alone”. This gesture is not to be considered in ability, but a good faith gesture by a well placed player to radically change the game and disturb MNO business models. Otherwise does Google really need an MVNO strategy to do what it wants to do? Will regulations totally block it from pursuing local licenses to establish MNO capabilities?
What does this mean to the Consumer?
Well, for starters a Google service will mean a Google pricing plan which can be rich with credit back from Advertising, data usage as credit back for certain destination minutes, richer communication services that provide context and content mix and practically utilizes pure packet technology as a way forward. A consumer’s country number is attached to their Google ID, and as a pair, now a powerful universal identity. With a strategy based regional data pricing, which Google can pull off, what this means is potentially a data call in China will be same cost as in Malaysia, or in Russia as will in the UK. The era of roaming charges will be out of the window – a plan that has long been in place for MNO’s to implement even in regional markets but is still hugely not fully realized. Messaging and other services will now simply be an extension of data and managed end-to-end by Google almost transparently. This means, new experience portals published to users via a single Google single-sign-on, and consumers ability to now manage more precisely usage and benefits through rich portals of price plans, presence and profiles. Now suddenly regional and global communications is totally simplified just as would be national calls or your messaging service and the need to be scouting for affordable SIM packs and charges will be history.
With ownership of Android, Google can now implement logic in Android that by default makes Android to Android communications almost purely a capability derived from IP, thereby circumvent traditional billing. Of-course MNOs can intercept and charge for such call’s but alas, the “control”, which is key for MNO’s would have been threatened. As a consumer, your mobile phone becomes a free extension of the Internet, and Google is the transparent service provider powering up your communication needs without the lock-down control MNO’s place on you – e.g. Must have Data, SMS, Voice roaming before you can enjoy all three, and you are subject to Roaming charges which seem to always have a hidden element only after the fact.
For MNO’s, these are defining moments
It means circuit services will not be major bread winners no more. At best, delimited to local operations with a very finite appeal and creating another pressure point to consider full revolution of the MNO business model. Packet services were less about technology and more about creating opportunities for multi-verse of services. The same wasn’t the case of circuit switched era where things had always sought to be point to point in order to secure the actors – so to speak.
Secondly service pricing in MNO businesses will be forced to further decrease to compete as MNOs now have seemingly less control over the end users communication needs – context and/or content. MNOs will need to find means to maintain consumers on their services and will want to mitigate the trends with pricing slash. Potentially, it’s a trend that could turn the tides on Google, but for what? Google has got the “muscle” to downplay the impact, or less be worried about competing head on. There will be a “sweet offer” that Consumers will seek, and inadvertently MNO’s cannot provide. For instance, with Google fiber the sweet offer is a free internet package for 10 years based on an initial CPE cost of $300. Something Comcast and the rest are finding that it’s cannibalized their offers to raw pitch. But then and again, let’s look at the catchment focus for Google fiber in this regard. By considering meager the focus market MNO’s and Carriers will be initially satisfied that well they’re king markets which are the major cities have not been entered into by Google. I argue that it’s only a matter of time. A smart strategy from an alternate player should always play in a way as to keep the opponent at rest. With Google fiber the play is from the edge – under-served areas in US.
The world of potential with packet services is still very young, and while investments by MNO’s in the past have been meager, the next 5 years can change that game as MNO’s are increasingly backed into a corner. There will be a point at which I expect real and sustainable consortium of MNOs to eventually wake up at the global level and take on the likes of new OTT players – Google, Microsoft etc – head on. Until that really happens, the verdict needs no writing on.
The other side of this is a new class game within the Mobile Network Operator space – a class game that puts the multinational players on the losing side due to their globalized and more expensive operations. (In any case, consumers are yet to realize the real benefit of multinational MNOs as their promise for simpler customer care, billing and roaming charges is still far from the euphoria it painted.) This class play will ring up a new opportunity for the underdogs – those small one country players, national operators with service only within one country and have little or no multinational brand affiliation. These players will play stronger by promoting and actually realizing the promise of “multinational capability” by riding on Google’s MVNO – that’s when the class war will begin. Imagine a local player now able to provide completely seamless inter-regional or global competitive pricing at no huge effort and able to keep its subscribers without fear of loosing them to the multi-national players because of pricing? The churn dynamics against local players will suddenly be redefined.
In an argument I made some time back, MNO’s by the way continue to have national / local presence, which also plays well for them, but for how long? The overheads that come with that, including service centers and ability to provide personalized interface will also be significantly a set back for MNOs. This advantage in the near future diminishes because the case for personalized touch with MNO’s itself has been re-dimensioned to a new level of automated self services. These services rely on IVRs and portals with a push to as much as 80/20 percentage split between calls handled by IVR’s to calls handled by actual agents. It this is an area too big for Google then I’ll argue to “Think future”. Banks and financial institutions are reaching out and engaging customers using fully automated ATMs. These ATM’s can handle almost all the service requirements of traditional walk-ins. From Cash-In, Cash-out to transfers, statement collection, investment management etc. If the future is heading that way, then the hurdle that Google must overcome towards customer support has indeed taken care of itself. The argument however is that how will this play in under-served areas where in most cases literacy is equally under-served? Well, If business processes can be simplified to the point that in Kenya a few push buttons can lead to money transactions, then am sure the issue of illiteracy can equally be overcome quite simply.
Google’s Internet push is on the ascension, and if Google Fiber is anything for end-users like me to appreciate, Google investing in landing fiber in any country isn’t an investment impossible. It’s a potential investment strategy that has both strong profitability basis/gains as would be the case for existing global and inter-continental fiber providers. The need for bandwidth is only heading one way, UP, so investments into backbone for inter-continental Internet will for some time to come be sane. Also, the odds for a differentiated mobile Internet experience using that investment can equally end up reducing pricing that MNOs are heavily investing in. layering on top of this the vast experience Google has in Internet technologies; a key Internet enabler, Supporting the current global Internet pipe, key content distributor and host, and as well a key DNS root server maintainer, it’s no doubt that making the move into MNO space will be a huge advantage for MNOs. However there is also a possibility, unless Google fails to play it’s card well, the chances of loosing or failing are not very certain, for now. In this case, Google has scale and can leverage that scale for the full “nine-yards” of play. Like Internet.org strategy which wasn’t too clear initially as to how MNO’s could play along, today, #Airtel is signing on it’s operations in Africa and India at the speed of saying “jack”. That is how one MNO can break any possible push-back.
It takes one MNO to break the front
In an article by Phil Goldstein, he writes arguing “5 reasons why Google MVNO would fail”. I will argue differently on his 5 reasons. Quite frankly also, I will argue his reasons are flawed to the core as they seem to be hovering on Now without looking at the Future. Engineering phones and Network is difficult, but I stand to differ that it’s not as difficult now as was back in the days. It isn’t as difficult as engineering and maintaining the Internet backbone. Now being a key provider that maintains its up-time – Google, they’ve got a lot of engineering prowess that current MNO’s lack. The future communications device are rich and powerful computers with services as applications. The Internet on the other hand is gravitating from client-server architecture to a distributed platform with services also existing as application.
A circuit network from every dimension is simpler to engineer compared to an IP network for similar service quality. In a circuit switched network, you’re managing channels that are opened and closed with dedication to end-to-end services. The application is at the center stage and services are required, fulfilled and released. In the case of IP, the play is one pipe for all services and applications, and the need to manage the packet layer to deliver a promise based on a variety of applications, protocols, services and layers of control and management points can be a behemoth of expertise. That expertise is already in Google, with MNO’s struggling to keep up. I’ve been there before, and I will confess without blinking an eye that engineering and managing a circuit switched network is far more easier compared to a packet based network for similar services for the same level of quality.
The transformation in the industry is heading towards software defined everything. A play of virtualized computing based on Internet Data Centers (IDCs) and redefined services into a new ubiquitous formula (Cloud services) using IP and Service Oriented Architecture (SOA). The Core and Access of the network are already heading towards functional virtualization (NFV’s) with new orchestration and management of services becoming completely Software defined with agile and fluid management capability becoming commodities for business control. An area Google compared to MNO’s is king in and as a result wielding heaps of experience ahead of MNOs.
Remember, the future isn’t traditional, it’s unconventional.
Google has already engineered the phone from ground up. It’s project Ara is another dimension into the breathtaking future oriented mindset of manufacturing and managing phones. It’s strategy of partnering with already established plauers to co-manufacture is in itself to instill confidence in the industry but not a lack of know-how. Several governments of emerging economies already have engaged and continue to speak to Google on how Google can help with the bridging the digital divide, tapping into the undeserved market, lowering the barriers to entry for Internet services. Google’s is responding with R&D aimed towards universal play by way of strides made in lowering the cost of handset manufacturing with redesign of the Android OS – Android One. It’s just one of the means to the end. Google continues to acquire several companies as well as in building access networks intended to extend the Internet to remote and undeserved areas – e.g. Project Loon The key aspects into engineering a future network have indeed all been covered by Google. From devices (terminals), access networks (Project loon and associated), the distribution pathways (Google fiber etc), the future Data Center and as services as Apps. Clearly, they are miles ahead in the future of everything and can indeed “attack” the market if it’s their strategy.
The impact of this announcement by Google leaves a lot to desire for MNO’s and as well a lot to anticipate as a Consumer. Before making such an unsettling announcement to the same industry it is heavily involved with, I’d assume Google understood the ramifications seriously. This announcement will force new strategies to be mapped out by MNOs, but I continue to bet my money on the fact that Google will make bold moves into the space.There will be smart MNOs that will quickly leap to embrace the move as part of a more robust framework to counter that ongoing cannibalization of traditional revenue streams. In the larger global space the play off will be molded on a case by case basis but with an eventual harmonized approach. As usual, we will expect that the initial attempt will be execute the strategy first within the US, but am sure the possibility of a friendly embrace in emerging economies will be high. To observe Google’s announcement as a pure “dog bark” is to play down a crucial opportunity for MNOs to redefine their game.
MNO’s playing along with Google now will be the early winners at all odds. I suspect other OTT players will equally begin their play in this same direction – Facebook is already started through their Internet.org initiative, Microsoft could invest in similar initiatives but with a focus on enterprise, Alibaba is already doing this anyway and more of such are to be seen in 2015/2016. The times are fast changing, and the change starts with MNO’s thinking outside the box. MNO’s must wake up together and invest actively into taking IP and IP related services to the next level. The grip hold MNO’s have is fast loosing traction. Local markets are the last frontier for the “dog fight”. If Google has started “barking” now, then beware, it’s sending the message out loud and clear. Am coming into your space.