Back in August a report emerged claiming that Google Fiber executives were having some second thoughts about this whole "building a nationwide fiber network from the ground up" thing. More specifically, the report suggested that some executives were disappointed with the slow pace of digging fiber trenches, and were becoming bullish on the idea of using next-gen wireless to supplement fiber after acquiring fixed wireless provider Webpass. As such, the report said the company was pondering some staff reductions, some executive changes, and a bit of a pivot.
Fast forward to this week when Access CEO Craig Barrett posted a cheery but ambiguous blog post not only formally announcing most of these changes, but his own resignation as CEO. According to Barrett, Google will continue to serve and expand Google Fiber's existing markets (Austin, Atlanta, Charlotte, Kansas City, Nashville, Provo, Salt Lake City, and The Triangle in North Carolina), and will also build out previously-announced but not yet started efforts in Huntsville, Alabama; San Antonio, Texas; Louisville, Kentucky; and Irvine, California.
From there, the direction Google Fiber will be headed gets murky. According to Barrett, Google has paused (read: killed) potential deployments in cities where Google Fiber had been having conversations, but hadn't yet given the green light for full deployment (Portland, Chicago, Jacksonville, Los Angeles, Oklahoma City, Phoenix, San Diego, San Jose, and Tampa). Most of the layoffs will be in these cities, notes Barrett:
"For most of our “potential Fiber cities” — those where we’ve been in exploratory discussions — we’re going to pause our operations and offices while we refine our approaches. We’re ever grateful to these cities for their ongoing partnership and patience, and we’re confident we’ll have an opportunity to resume our partnership discussions once we’ve advanced our technologies and solutions. In this handful of cities that are still in an exploratory stage, and in certain related areas of our supporting operations, we’ll be reducing our employee base."
A report over at Bloomberg notes that about 9% of employees at Access (which covers multiple projects, not just Google Fiber) will be let go, which is notably fewer staff reductions than last summer's report had suggested. Bloomberg's insiders also claim that there have been some rifts among executives at Google/Alphabet/Access over whether to remain dedicated to the laborious process of fiber installations, or to pivot more completely to wireless:
"Moving into big cities was a contentious point inside Google Fiber, according to one former executive. Leaders like Barratt and Dennis Kish, who runs Google Fiber day-to-day, pushed for the big expansion. Others pushed back because of the prohibitive cost of digging up streets to lay fiber-optic cables across some of America’s busiest cities."
That there's some hesitation isn't surprising. Not only is building a fiber network from the ground up incredibly hard, expensive, and time consuming, the telecom industry is awash with deep pocketed incumbents intent on making things as difficult as possible for competitors like Google Fiber (and downright impossible for smaller ISPs). From AT&T suing cities to thwart attempts to streamline utility pole attachments, to incumbent ISPs writing awful state law prohibiting public/private partnerships, telecom can certainly be a cesspool of protectionism of the worst sort.
While these incumbent ISPs (and their armies of paid policy mouthpieces) will likely spend the next few weeks celebrating the "death of Google Fiber," there's nothing stopping the company from pivoting to next-generation wireless. Google has filed applications with the FCC to conduct trials in the 71-76 GHz and 81-86 GHz millimeter wave bands, and is also conducting a variety of different tests in the 3.5 GHz band, the 5.8 GHz band and the 24 GHz band. That said, it certainly remains possible that at some point Google gets tired of ramming its head against VerizoCasT&T and sells the project off in a few years, leaving us with another sad historical footnote in the often pitiful national quest for something vaguely resembling broadband competition.
You'd be hard pressed to find a better example of government-pampered mono/duopoly than AT&T. For years, the ISP has all but bought state laws protecting it from broadband competition. When simply buying awful state laws proves too cumbersome or obvious, it often tries to use poison pills in unrelated legislation (like traffic laws) to hinder competitors. The end result is a laundry list of states like Tennessee that remain broadband backwaters, quite by AT&T design, as the company uses state legislatures as glorified marionnettes, all marching in line to protect the status quo.
That's why it's more than a little amusing to see AT&T pen a new blog post that mocks Google Fiber's lack of progress (in part thanks to AT&T), while maligning the upstart ISP for "seeking out government favoritism at every level":
"Google Fiber will no doubt continue its broadband experiments, while coming up with excuses for its shortcomings and learning curves. It will also no doubt continue to seek favoritism from government at every level. Just last week Google Fiber threatened the Nashville City Council that it would stop its fiber build if an ordinance Google Fiber drafted wasn’t passed. Instead of playing by the same rules as everyone else building infrastructure, Google Fiber demands special treatment and indeed in some places is getting it, unfairly."
What's AT&T actually upset about? Google Fiber has been pushing to reform utility pole attachment rules, one of several layers of regional bureaucracy telecom monopolies used to slow broadband competitors from coming to market. Google Fiber's been pushing cities like Louisville and Nashville for "one touch make ready" laws that let a single, insured contractor move any ISPs' hardware -- often reducing installation from half a year to just a month. AT&T's response? To sue cities like Louisville for overstepping their authority. Such decisions, AT&T argues, should be left up to the state regulatory bodies that AT&T all but owns.
AT&T's taking the opportunity to kick Google Fiber while it's down, the company plagued by recent rumors that it's pausing a handful of unannounced cities to consider supplementing fiber service with wireless broadband. Sources with knowledge of Google Fiber's plan tell me many of the reports about Google Fiber hitting deployment "snags" have been either overstated or in error, but the fact that Google Fiber hasn't publicly clarified its dedication to expansion suggests there likely is some possible restructuring going on as the company takes stock of its recent Webpass acquisition and eyes wireless as a way to supplement fiber.
Regardless, AT&T's blog post goes to great lengths to lecture Google Fiber about the limited impact of its gigabit fiber to the home deployments. This, despite the fact we've highlighted time and time again how AT&T's own gigabit deployments are dramatically and misleadingly overstated (something I affectionately refer to as "fiber to the press release."). Amusingly, AT&T's Joan Marsh also goes out of her way to mock Google Fiber for recently saying it might have to abandon Nashville as a launch market if AT&T and friends don't get out of the way:
"Meanwhile, without excuses or finger-pointing, and without presenting ultimatums to cities in exchange for service, AT&T continues to deploy fiber and to connect our customers to broadband services in communities across the country. Welcome to the broadband network business, Google Fiber. We’ll be watching your next move from our rear view mirror. Oh, and pardon our dust."
Last year you'll recall that T-Mobile launched its "Binge On" zero rating program, which exempts the biggest video services from the company's usage caps (aka "zero rating"). Net neutrality advocates quickly complained that the practice violated net neutrality, since the very act of giving some companies an advantage automatically disadvantages some others. After T-Mobile spent some time lying about the nature of the program, the EFF came out with a detailed report noting that T-Mobile was just throttling all video files back to 1.5 Mbps, whether the content was being streamed or directly downloaded.
Net neutrality advocates like the EFF argued that the program at the very least should be opt in instead of opt out, concerns that T-mobile continues to ignore. YouTube similarly initially complained about the program and that video partners were being throttled by default. But in a matter of months, Alphabet/Google appears to have completely changed its mind, issuing a new blog post that says it's now partnering with T-Mobile to zero rate Google Play Movies and YouTube content traveling over the T-Mobile network.
According to YouTube, T-Mobile made a number of changes to Binge On that satisfied YouTube's concerns, including new "short codes" that let users more easily opt out. T-Mobile also apparently was willing to listen to YouTube's concerns about throttling partner services by default with no dialogue between companies:
"While T-Mobile has always stated that any video service can join the program at no charge, prior to our discussions, video services were not given a choice about whether their streams would be managed by T-Mobile if they did not join the program. Going forward, any video service meeting traffic-identification requirements will be able to opt-out, and T-Mobile will stop including them in the Binge On program and will no longer modify their video streams. In addition, T-Mobile will now work with video services that wish to optimize their own streams, using an average data rate limit. This allows video services to offer users an improved video experience, even at lower data rates, by taking advantage of innovations such as video compression technology, benefiting T-Mobile, their customers, and video providers.
To be clear it's good that T-Mobile is being slightly more transparent, even though it lied pretty consistently about what it was actually doing in the first place. It's also great that the company is providing better, simpler opt-out tools for consumers (dial #263# to turn Binge on off, and dial #266# to turn it on again). And it's also a major improvement that T-Mobile's letting video service providers opt out, while giving companies more control over precisely how video traffic is managed. The problem is that none of this solves the core problem with zero rating: the horrible precedent set by zero rating in the first place.
The superficial consumer lure of "free data" overshadows the fact that zero rating, no matter how much lipstick you put on it, still puts some companies at a market disadvantage. In a press release announcing YouTube's inclusion, T-Mobile crows that there's now 50 Binge On video partners. But how many video services exist on the Internet? 500? 1000? How many non-profits, educational services, startups, and independents still aren't being whitelisted by T-Mobile's systems? How many even realize they're being put at a market disadvantage to bigger companies?
By opening the door to zero rating a sliver, we've opened the door to fundamentally changing how Internet business works. That's why numerous regulators in India, Japan, The Netherlands and elsewhere have banned zero rating outright. Here in the States, the FCC, wary of hindering usage cap driven "innovation," decided to let the zero rating story play out, addressing anti-competitive behavior on a "case by case basis." But the FCC has failed to act, and that failure has not only resulted in T-mobile's Binge On (potentially bad), but companies like Verizon and Comcast now exempting their own content from caps (immeasurably worse).
Despite its faux-punk-rock consumer friendly rhetoric, T-Mobile has never been a fan of net neutrality, repeatedly coming out against both net neutrality rules and the FCC's Title II push. Google, once a net neutrality champion, has consistently weakened its position on the subject as it realized it too could benefit from a distorted playing field (especially in mobile).
Because users get "free data" doesn't mean zero rating is a good idea. Because YouTube's now happy that it has a little more control, doesn't make zero rating a good idea. Because users and companies can opt out, doesn't negate zero rating's negative impact on the Internet economy. Because all-too-many consumers, analysts and journalists don't really understand what's happening here doesn't make zero rating a good idea. Setting arbitrary usage caps and then letting some companies bypass them aggressively distorts the entire landscape of the Internet. But because so many folks still don't appear to understand this, we're down the zero rating rabbit hole. And it's not really clear if we're ever coming back.
from the they're-wrong-about-the-throttling,-maybe-not-on-the-jerk-thing dept
On Monday we wrote about T-Mobile flat out lying about the nature of its BingeOn mobile video service -- and after a couple of days of silence, the company has come out swinging -- by lying some more and weirdly attacking the people who have accurately portrayed the problems of the service. As a quick reminder, the company launched this service a few months ago, where the company claimed two things (though didn't make it entirely clear how separate these two things were): (1) that the company would not count data for streaming video for certain "partner" companies and (2) that it would be "optimizing" video for all users (though through a convoluted process, you could opt-out).
There were a bunch of problems with this, starting with the fact that favoring some partner traffic over others to exempt it from a cap (i.e., zero rating) is a sketchy way to backdoor in net neutrality violations. But, the bigger issue was that almost everything about T-Mobile's announcement implied that it was only "partner" video that was being "optimized" while the reality was that they were doing it for any video they could find (even downloaded, not streamed). The biggest problem of all, however, was that the video was not being "optimized" but throttled by slowing down video.
Once the throttling was called out, T-Mobile went on a weird PR campaign, flat out lying, and saying that what they were doing was "optimizing" not throttling and that it would make videos stream faster and save users data. However, as we pointed out, that's blatantly false. Videos from YouTube, for example, were encrypted, meaning that T-Mobile had no way to "optimize" it, and tests from EFF proved pretty conclusively that the only thing T-Mobile was doing was slowing connection speeds down to 1.5 Mbps when it sensed video downloads of any kind (so not even streaming), and that actually meant that the full amount of data was going through in many cases, rather than an "optimized" file. EFF even got T-Mobile to admit that this was all they were doing.
So that makes the response of T-Mobile execs yesterday and today totally baffling because rather than actually respond to the charges, they've doubled down on the blatant lying, suggesting that either it's executives have no idea what the company is actually doing, or that they are purposely lying to their users, which isn't exactly the "uncarrier" way that the company likes to promote.
We'll start with the big cheese himself, CEO John Legere, whose claim to fame is how "edgy" he is as a big company CEO. He's now released a statement and a video that are in typical Legere outspoken fashion -- but it's full of blatant lies.
The video and the typed statement are fairly similar, but Legere adds some extra color in the video version.
Let's parse some of the statements. I'll mostly be using the ones from the written statement as they're easier to cut and paste, rather than transcribe, but a few from the video are worth calling out directly.
I’ve seen and heard enough comments and headlines this week about our Binge On video service that it’s time to set the record straight. There are groups out there confusing consumers and questioning the choices that we fight so hard to give our customers. Clearly we have very different views of how customers get to make their choices -- or even if they’re allowed to have choices at all! It’s bewildering …so I want to talk about this.
Of course, this is a nice, but misleading attempt to frame the conversation. No one is complaining about "giving choices to consumers." They're complaining about (1) misleading consumers and (2) providing a worse overall experience by throttling which (3) directly violates the the FCC's prohibition on throttling. The next part I'm taking from the video itself, rather than the printed statement, because Legere goes much further in the video, including the curses, which magically don't show up in the printed version:
There are people out there saying we’re “throttling.” That's a game of semantics and it's bullshit! That's not what we're doing. Really! What throttling is is slowing down data and removing customer control. Let me be clear. BingeOn is neither of those things.
This is flat out wrong and suggests Legere doesn't even know the details of his own service. As the EFF's tests proved (and the fact that YouTube videos are encrypted should make clear) T-Mobile is absolutely slowing down data. In fact, EFF got T-Mobile to confirm this, so Legere claiming it's "bullshit" is... well... bullshit!
But he's playing some tricky word games here, claiming that throttling is not just slowing down data, but also removing customer control. That's (1) not true and (2) also misleading. For all of Legere and T-Mobile's talk about "giving more options to consumers" or whatever, they're totally leaving out the fact that they automatically turned this on for all users without a clear explanation as to what was happening, leading to multiple consumer complaints about how their streaming videos were no longer functioning properly -- even for users on unlimited data plans.
Customer choice? Sure they could "opt-out" after through a convoluted process that many did not understand. But T-Mobile made the choice for all its users, rather than providing a choice for its customers to make.
Mobile customers don’t always want or need giant heavy data files. So we built technology to optimize for mobile screens and stream at a bitrate designed to stretch your mobile data consumption. You get the same quality of video as watching a DVD, but use only 1/3 as much data (or, of course, NO data used when it’s a Binge On content provider!). That's not throttling. That's a huge benefit.
Again, this is both wrong and misleading. There is no optimization. Legere is lying. They are 100% slowing down the throughput on video when they sense it. The EFF's tests prove as much. Yes, for some video providers when they sense lower bandwidth, they will downgrade the resolution, but that's the video provider optimizing, not T-Mobile. T-Mobile is 100% throttling, and hoping that the video provider downgrades the video.
But in cases where that doesn't happen then it doesn't save any data at all (the EFF test confirmed that the full video file still comes through, just slower).
Also, note the play on words "You get the same quality of video as watching a DVD." At first you think he's saying that you get the same video quality overall, but he's not. He's saying as a DVD, at 480p, which is lower than the 1080p that many HD videos are offered at. And that's what many people are complaining about -- that they'd like to watch videos at the full 1080p, but T-Mobile made the choice that they can't do that unless they go through a convoluted process to turn this off.
Rather than respond to any of this, Legere then claims that "special interest groups" and Google are doing this.... "to get headlines."
So why are special interest groups -- and even Google! -- offended by this? Why are they trying to characterize this as a bad thing? I think they may be using Net Neutrality as a platform to get into the news.
Wait, what? Google -- the same Google that absolutely refused to say anything publicly at all about net neutrality for years during the debate suddenly wants to get into the news by jumping on the net neutrality bandwagon? Does Legere have any idea how ridiculous that sounds? And it's not like Google has a problem getting into the news. And what about EFF and others? Does he really think they need to get extra news coverage?
But note the facts here: at no point does Legere respond to the actual charges leveled against the company. He then concludes by yelling at everyone for daring to complain about this:
At T-Mobile we're giving you more video. More choice. And a powerful new choice in how you want your video delivered. What's not to love? We give customers more choices and these jerks are complaining, who the hell do they think they are? What gives them the right to dictate what my customers, or any wireless consumer can choose for themselves?
Nice. I'm part of the contingent complaining about this and I'm also a T-Mobile customer... and the CEO just called me a jerk while telling me he's fighting for his customers? Really now?
And again this whole statement is blatantly misleading. The "choice" was made by T-Mobile for all users, and getting out of it involves a convoluted process that most don't understand and where none of this was made clear to end users. Beyond violating the FCC's "no throttling" rule, I wonder if it also violates the FCC's transparency rules as well, in which they are required to be much more upfront about how the data is being treated.
Also, the statement above is from the video where we're described as "jerks," but in the written version it leaves out the "jerks" claim, but also includes the following bit mocking YouTube for letting users choose to change the resolution on videos:
YouTube complained about Binge On, yet at the same time they claim they provide choice to customers on the resolution of their video. So it's ok for THEM to give customers choice but not for US to give our customers a choice? Hmmm. I seriously don't get it.
But that's bullshit also. YouTube's choice option there is a clear pulldown on every video shown, so that a user just needs to click on the video their watching and set the resolution. T-Mobile's is a process that's not clear at all, with some users reporting they had to call in and get T-Mobile customer service to turn BingeOn off for their account. To compare the two situations is completely bonkers.
As far as I can tell, Legere either doesn't understand what his own company is doing technically, or knows and is purposely misrepresenting it. Neither of those look good and go against the entire "uncarrier" concept they keep pitching. I'd expect better as a T-Mobile customer than being told that I'm a "jerk" for pointing this out.
And it appears he's not the only one among senior execs at T-Mobile who still don't realize what their own company is doing. On Wednesday at a Citigroup conference, T-Mobile's Chief Operating Officer Mike Sievert
spewed some more nonsense suggesting he, too, has no idea what his own company is doing:
At a Citigroup investor conference Wednesday, T-Mobile executives shot back, saying YouTube’s stance is “absurd.” YouTube is owned by Alphabet Inc. “We are kind of dumbfounded, that a company like YouTube would think that adding this choice would somehow be a bad thing,” said T-Mobile Chief Operating Officer Mike Sievert. He said YouTube hasn’t “done the work yet to become part of the free service.”
Taken at face value, that comment makes no sense. If YouTube hasn't done the work yet to become a part of the free service than why the fuck is T-Mobile slowing down its videos? YouTube wasn't complaining about "adding this choice." YouTube was complaining about direct throttling of video content by T-Mobile, in clear violation of the FCC's prohibition on throttling.
Sievert and Legere both don't seem to understand (1) what YouTube and users are complaining about or (2) what his own company is doing. That's... troubling, given that these are the CEO and COO of the company. It really seems like T-Mobile execs might want to spend some time talking to its tech team to understand the fact that the only thing T-Mobile is doing to video is throttling it down to 1.5 Mbps, rather than any actual "optimization" before spewing more nonsense and calling their own customers "jerks." And, they might want to realize that their claim that this is all "bullshit" is actually complete bullshit. And that their bullshit may very well violate the FCC's rules.
A few years ago, there was no reason to see Apple and Google as direct competitors — but thanks to the mobile space, all that has changed. Now the two tech giants are going head-to-head in a contest for the mobile device market share, but their approaches to this race remain very different. This week, we discuss the nuances of this competition and what these two different approaches can teach us about business models and innovation.
The National Security Agency and its closest allies planned to hijack data links to Google and Samsung app stores to infect smartphones with spyware, a top-secret document reveals…
The main purpose of the workshops was to find new ways to exploit smartphone technology for surveillance. The agencies used the Internet spying system XKEYSCORE to identify smartphone traffic flowing across Internet cables and then to track down smartphone connections to app marketplace servers operated by Samsung and Google.
Branded "IRRITANT HORN" by the NSA's all-caps random-name-generator, the pilot program looked to perform man-in-the-middle attacks on app store downloads in order to attach malware/spyware payloads -- the same malicious implants detailed in an earlier Snowden leak.
In addition to discovering that phone ID info, along with geolocation data and search queries, was being sent without encryption, the researchers also found that clearing the app cache failed to remove DNS information -- which could allow others to reconstruct internet activity. Citizen Lab has informed the makers of UC Browser of its many vulnerabilities, something the Five Eyes intelligence agencies obviously had no interest in doing.
But IRRITANT HORN went beyond simply delivering malicious implants to unsuspecting users. The Five Eyes agencies also explored the idea of using compromised communication lines to deliver disinformation and counter-propaganda.
[The agencies] were also keen to find ways to hijack them as a way of sending “selective misinformation to the targets’ handsets” as part of so-called “effects” operations that are used to spread propaganda or confuse adversaries. Moreover, the agencies wanted to gain access to companies’ app store servers so they could secretly use them for “harvesting” information about phone users.
As is the case with each new leak, the involved agencies have either declined to comment or have offered the standard defensive talking points about "legal framework" and "oversight," but it's hard to believe any legal mandate or oversight directly OK'ed plans to hijack private companies' servers for the purpose of spreading malware and disinformation. And, as is the case with many other spy programs, IRRITANT HORN involves a lot of data unrelated to these agencies' directives being captured and sifted through in order to find suitable targets for backdoors and implants.
So things just keep getting stranger and stranger online. A bunch of mobile operators are apparently planning to start automatically blocking all mobile ads. Now, for those of you who hate ads online, this might seem like a good thing, but it is not. If you want to disable ads on your own, that should be your call. In fact, as we've noted before, we think people on the web have every right to install their own ad blockers, and we find it ridiculous when people argue that ad blocking is some form of "theft."
But this is different... and this is dangerous.
As the reports make clear, this move has nothing to do with actually protecting the public from malicious or annoying ads... and everything to do with the mobile operators hoping to shake down Google.
The plan – which would be devastating to companies reliant on advertising – is not limited to a single European network. Its apparent aim is to break Google’s hold on advertising.
The FT report says that “an executive at a European carrier confirmed that it and several of its peers are planning to start blocking adverts this year” and will be available as an “opt-in service” however they are also considering applying the technology across their entire mobile networks.
And, the clear plan is to then go to Google and say "give us money or else":
The unnamed European carrier in the Financial Times article is reportedly planning to target Google and block its ads to force the company into giving up some of its revenue.
The companies are using a product called Shine, which has a big bullshit claim on its page that it "champions the consumer's rights to control mobile ads." If that were the case it would be offering the tool to consumers. It's not. It's selling to big service providers, and then letting those service providers spy on all of your surfing in order to remove the ads.
This should be a serious concern for anyone using a service that signs up for Shine. Even if it's an "opt-in" offering, what the company is really doing is a form of deep packet inspection and blocking your mobile internet from acting the way it should. In other words, this looks like a net neutrality violation on a large scale.
As we've pointed out in the past, the broadband providers aren't stupid. They know that if they go for a direct plan of blocking or degrading apps you like, it gets people angry. So they look for ways to break net neutrality that look like they're doing the consumer favors -- things like zero rating, and now this. But that's not what's happening at all. This is all just the exact same plan as many broadband providers have had for years: figure out a way to pressure Google into coughing up some of its revenue, not by earning it, but by creating a mess for the company.
And, in the process, it's causing a mess for users by mucking with their internet connections, doing deep packet inspection, and blocking content.
from the come-for-the-low-prices;-stay-for-the-features dept
By now, you may have already read last week's news, broken by The Information (paywall -- but coveredwidelybylotsofothersources), that Google plans to launch a mobile cellular service in the US late this year -- as an MVNO (Mobile Virtual Network Operator -- basically offering a cellular service, but using someone else's physical network).
This is huge news, and it is correctly observed that this is likely to shake up the industry. The Google virtual network, rumored to be called Nova, will run on top of not one, but two infrastructure-based network operators: T-Mobile and Sprint. By combining the two, Nova can have wider geographic reach, higher average data speeds, and higher average signal strength. It may also be possible to bond the two carriers together to get much faster speeds. Nova could also benefit from lowest-cost routing, running on whichever network's costs are lowest in real time.
Analysts have suggested that the threat of Nova will strike fear into the hearts of Verizon Wireless and AT&T, and perhaps it does. Sprint and T-Mobile, whether combined by a merger, or virtually by Nova, are still a far more formidable competitor than each alone. And Google is known for offering services for free (or very cheap compared to industry norms). I wouldn't expect to see any kind of free cellular service here. At best, Google will offer the service above cost, which I'd estimate could start as low as $15 per month. And that's the crux of most of the news coverage: "Google to attack market with low price."
But most of the analysis thus far has left a lot of forward-looking ideas on the table. I'm betting that Google has much more in mind than a relatively low-price cellular service that can ride on the best signal of two networks. Here are some ideas Google should look to push out, and if they do, it will reveal how this MVNO is a huge strategic play for Google:
Nova will not be a virtual network that aggregates two disparate networks. It will aggregate three. The increasing spread of WiFi hotspots and their IP-based connections are a no-brainer. And if Google seeks to keep prices low, it can offload as much data as possible onto users' home and work WiFi networks. Expect the Nova virtualization layer to incorporate IP connections from Sprint, T-Mobile, and WiFi.
That said, it makes sense for Google to jump into telecoms now, when an IP-only network is finally feasible. LTE provides the low-latency data connections required for VoIP. I expect Nova to be either all-VoIP, or at least mostly so. This lowers the operational expenses versus a conventional cellular service, which has to manage classic circuit-switched voice networks and an IP data network in parallel.
To further drive down the costs of the network, and increase the amount of WiFi offload, I wouldn't be surprised if Google either partnered with, or copied a company like Devicescape*. Devicescape is a firm that has aggregated millions of public hotspots into a "Curated Virtual Network" (CVN). This firm, or similar competitors, has already developed and demonstrated the technology to virtualize millions of diverse WiFi into one virtual layer. Google will probably follow on the heels of Republic Wireless, which uses the CVN and keeps costs down by being a "WiFi-first" cellular MVNO on Sprint's infrastructure.
It's rumored that over at Sprint, which is now owned by Japan's Softbank, the driving force for this deal was Masayoshi Son. Son isn't known for modest market disruption. He goes big. He spent $21.6 billion to acquire a controlling interest in Sprint, and one of the key assets of the deal isn't Sprint's current standing in the US cellular market -- it is Sprint's tremendous (yet fallow) spectrum holdings at 2.5GHz. Now, with all that money spent, a question looms: What deep pocketed partner could be entreated to help invest the capital required to develop LTE-A networks on that spectrum? Google certainly comes to mind. At the very least, a popular Google MVNO would bring demand for data that would help Son develop and utilize his US spectrum assets.
That covers the network upheaval, so now onto phones and devices.
Google's Nexus phones have always been a success at pushing along the other phone makers and carriers, but less of a success in terms of sales volume. But the Nova network could change the outlook for Nexus sales. As it stands, the Nexus 6 is among the few phones that already has the right radios for both Sprint and T-Mobile's different networks and frequencies. The mere existence of Nexus line proves that Google can get phones made to meet its precise needs (a huge feat, for anyone who knows this industry). But, up to now, Nexus phone functionality has been both driven by Google and also limited by mobile carriers. No sense building in features that carriers or their networks won't support, right? And that's Nexus, the most un-encumbered phone model available. Every other handset OEM out there gets pushed around even more by the powerful carriers, since carriers are the bulk buyers of the devices. So far, Apple is the biggest exception. Apple has fought and won more vertical market power than any handset vendor ever. Apple can drive many features to market, but even so is still limited by carriers: Remember tethering, or FaceTime being blocked? But what if Google were the carrier for its own Nexus phone? There would be nothing between the services it conceives and the customer. So, Google will sell more Nexus phones, and the phones willenhance the Nova network's functionality. And all with low capital invested or risked, since Google owns neither phone factories nor network towers.
And in fact, the Nova network is just the "Nexus One of cellular networks." Let's not forget the Nexus One phone success strategy: Either Nexus succeeds and sells high volume, or it fails, but still pushes other stakeholders along towards Google's market objectives. You can substitute the word "Nexus" in that sentence with either of: "Google Fiber," "700MHz FCC Auctions," "Android," or "Nova" for that matter. It's a great strategic play for Google: Heads we win...tails we win. But there is thin ice here with respect to Fair Trade -- it's not fair for Google to deliberately fail in the cellular market, or lose money just to bring down its competitors (the economics term is "dumping"). But, in this case, Google can easily try to make Nova a money-earner, and/or a strategic win. And the WSJ has reported that Google is not strictly pursuing a low-price service.
So, the phone hardware issue is also disruptive. What about services, features, and functionality? Now comes the icing on the cake:
An unconstrained Google phone on its own network, running all-IP would unleash many of the company's disparate services that have somewhat languished as orphans for years. Google Voice could be the entire voice component of the Nova network, featuring cheap worldwide VoIP, visual voicemail, and voice messaging a.k.a push-to-talk. Hangouts would be the default chat and SMS app.
Where else does Google have ambition, and could the phone fit in there? The Android Auto efforts, perhaps? Connected home via its assets Dropcam and Nest? Why not. A Nova Nexus could easily be a hub inside a connected car, leveraging the car's display with Android Auto. Throw out voice commands using your car's microphone telling your garage door to open and to turn off your home alarm. The Internet of Things? Sure, Google can be more creative, and offer very interesting pricing models in IoT, if it operates its own MVNO.
Now, to push some boundaries, what about total communications convergence? Think "smartphone in the cloud". Google could take Chrome on the desktop, Google Apps on iOS devices, and Android tablets and reproduce the full range of communications services from the phone. Sitting at your desk, but forgot your phone at home? MMS, SMS, and other chat services would just pop up on your PC. You could make voice calls using the same number from anywhere - one cellular account, but on any device. Need to make changes on your mobile phone? Do it remotely from your PC. And it's not just computers that could access the phone's features: your TV, your car, or your Microsoft Hololens could each be virtual iterations of your phone. Suddenly, your "communications self" is liberated from this 5" brick to which we've become so attached. Your "self" follows you, not your phone. Google has been working on many of these ideas for years. You can use Google Voice, and Google Hangouts on a smartphone and a PC, but it adds complexity for users because the phone still has another voice service, another SMS app, and phone number as its identity. That phone identity historically has been locked within a carrier's garden walls. But with Nova + Android + Nexus, Google can remove the entire construct of walls.
Can Google promote, market, and sell a device? Well, the company has learned a lot since the first Nexus One. The Play store is now much more polished, and it successfully sells devices every day. Google can easily promote its network and phones in its search results, or in millions of other ad inventory spaces that it manages. Support was a noted weakness of the first Nexus One, but even that has come a long way. Google now has a few years of experience in customer support through projects like Google Fiber. So, while support is unlikely to be a specific strength for Google, the bar isn't really set that high, is it?
Now, none of this is a slam dunk. Analyst Phil Goldstein wrote over at FierceWireless that there are 5 reasons why Google's MVNO will fail. And while I disagree with five of his five points, it is true that there are numerous hurdles to overcome. Goldsteins five points, in aggregate, represent true barriers. And we've seen lots of big profile MVNOs fail. In fact, on the US docket, the more ambitious the MVNO, the lower the track record of success. The failures have stemmed from high handset cost (ESPN), an app posing as a carrier (Amp'd), no clear target market (Disney), high marketing and Subscriber Acquisition Costs (Helio). To counter, I would argue that Google has the ability to produce hardware at the right price points, has a very wide audience of Android and Google users, and has good access to their markets using existing web properties. And it's not all doom and gloom, lesser MVNOs have frequently found measured success: Simple Mobile, Republic Wireless, TracFone, Virgin Mobile, etc. And none of those had the structural advantages, or deep pockets that Google has.
In short, there is a lot more below the surface of a Google MVNO. You can bet that the ambitious people steering this thing are not simply thinking of "a new network using T-Mobile and Sprint, but slightly cheaper."
*Disclosure: In the past, I have been a consultant for Devicescape. I haven't had a professional or financial connection to the firm in over a year.
Over the weekend, it came out that two giant pharmacy chains, Rite Aid and CVS, had started blocking Apple Pay, the massively hyped new payment system from Apple that has received much praise for its ease of use. The product had worked for about a week before the two companies started blocking such near field communication (NFC) payments (which also takes out other NFC payment options like Google Wallet). While Rite Aid gave a vague and slightly ridiculous explanation -- that it is "still in the process of evaluating our mobile payment options" -- pretty much everyone knows the truth. A bunch of retailers, led by Walmart, have been creating their own mobile payment system called CurrentC, which cuts out the credit card companies. But, it also builds in all the tracking and spying features of store loyalty cards, expanded across all merchant partners. Apple Pay lets people remain anonymous.
In short: CurrentC lets merchants (1) cut out credit card transaction fees and (2) get more and more data on shoppers. No wonder they want to block out other options.
All of these moves should be concerning. They're clearly not being done with the consumer in mind. Nearly everyone who's played with Apple Pay has agreed that the system is a huge leap ahead for mobile payments in terms of ease of use. Instead, we're seeing giant organizations looking to team up to keep competitors out of the market. At the very least, this should raise serious antitrust issues. But it also demonstrates, in a different sphere, why net neutrality is such a concern. When you have large companies that can effectively collude to block or kill certain powerful and useful apps and services, it hinders and blocks important innovations, leaving consumers significantly worse off. Not only are they left with fewer choices and lower quality apps and services, but it also pushes consumers into services -- like CurrentC -- that take away their privacy.
While the more cynical folks out there have insisted that the tech industry is a happy partner with the intelligence community, the reality has been quite different. If anything, in the past many companies were simply... complacent about the situation, not realizing how important these issues were. That's problematic, but the Snowden revelations have woken up those firms and enabled the privacy and security gurus who work there to finally get the message across that they absolutely need to do more to protect the privacy and security of their users. That's why you see things like Apple's new local encryption by default on iOS8, meaning that even if law enforcement or the intelligence community comes knocking, Apple can't get much of your data off of your device.
“Unlike our competitors, Apple cannot bypass your passcode and therefore cannot access this data,” Apple said on its Web site. “So it’s not technically feasible for us to respond to government warrants for the extraction of this data from devices in their possession running iOS 8.”
“For over three years Android has offered encryption, and keys are not stored off of the device, so they cannot be shared with law enforcement,” said company spokeswoman Niki Christoff. “As part of our next Android release, encryption will be enabled by default out of the box, so you won't even have to think about turning it on.”
Of course, you can expect to see the DOJ pushing for new laws to somehow block this or get backdoor access. It may create a future fight worth watching. In the meantime, though, it's great to see tech companies actually competing on how well they can protect the privacy of their users' data from the prying eyes of law enforcement and intelligence agencies.