Kevin Tofel, writing for ZDNet (bold emphasis is mine):
Google’s new mobile voice and data service may save you money, or it may not. Either way, it offers network redundancy and coverage advantages for work and personal use.
“Redundant” is the operative word here. Enough to make operators feel nervous. Why? In very broad strokes, this is essentially why:
With Project Fi, the mobile operators will, effectively, split the revenue from a consumer. That helps one operator (who might have otherwise “lost” the consumer) and hurts the other (who might have “won” that consumer). Meanwhile, the consumer doesn’t really know if the great network coverage they get is specifically from T-Mobile or from Sprint, or both. And, they’re now mentally tracking another brand in the picture: Google – as they pay Google each month. The operator brand, essentially, starts to mean a bit less.
Extrapolate this out — imagine that operators actually *embrace* this: now they are effectively splitting consumer revenue (in a way that’s not very proportional to their individual strengths), each continues running a network that’s fairly redundant with its rivals’, and each operator’s brand is less meaningful. What happens in this case?
The incentives get set up for three things to happen: network infrastructure sharing (already happening in Europe), operator consolidation (ditto), or the opposite (new operators, who share the network, but seek to compete in a different way; say, customer service). All three potential outcomes are fraught with uncertainty for incumbent operators. (Verizon, AT&T, T-Mobile, Sprint.) A particular operator might end up faring well, but that’s no comfort to any CEO or board today.
There’s no doubt, however, that these scenarios would benefit the consumer: lower cost, better coverage, broader coverage. And Google would benefit, too: more people using smartphones, in more locations, doing more search, seeing more ads. In fact, anyone who can easily, cheaply benefit from more smartphone usage will be happy (developers, stores, etc.). So, plenty of upside for others, if not for operators.
So why, then, are T-Mobile and Sprint participating? First, they control the risk: Google Fi launches with just one device (Nexus 6). It’s a very capable device, but not one that’s likely to constitute a major portion of either operator’s user base. And unlike Google’s other disruptive network project (Google Fiber), in this experiment the incumbents – T-Mobile and Sprint – are able to pull the plug (essentially) at any time. Finally, there’s a bit of upside: any consumer that joins T-Mobile or Sprint for Project Fi is a consumer that doesn’t join Verizon and AT&T. And by associating themselves with Google, T-Mobile and Sprint continue to promote themselves as edgy and consumer-focused. With limited risk, their attitude (most likely) is: “let’s try it and see what we can learn”.
Yes, these are generalizations and extrapolations, most of them beyond any sort of predictable time horizon. … but they’re exactly the sort of thing that established companies worry about: destabilization from “somewhere”, especially if the “someone” is Google. Let’s see how this plays out.
