Google's MVNO - Project Fi is disappointing

A first look at Google's MVNO to launch in the US on the Sprint and T-Mobile networks reveals itself a little disappointing (or a relief if you are a network operator). I had chronicled the announcement of the launch from Mobile World Congress and expected much more disruption in services and pricing than what is announced here.

The MVNO, dubbed project Fi, is supposed to launch shortly and you have to request an invitation to get access to it (so mysterious and exciting...).

At first glance, there is little innovation in the service. The Google virtual network will span two LTE networks from different providers (but so is Virgin's in France for instance) and will also connect "seamlessly" to the "best" wifi hotspot. It will be interesting to read the first feedback on how the device selects effectively the best signal from these three options and how dynamically that selection occurs. Handover mid call or mid data sessions are going to be an interesting use case, Google assures you that the transition will be "seamless".

On the plus side, Google has really taken a page from Iliad's free disruptive service launched in France and one-time rumored to acquire T-Mobile US. See here the impact their pricing strategy  has had on the French telecommunications market.

1. Fi Basic service comes with unlimited US talk and text, unlimited international text and wifi tethering for $20 per month.
2. The subscriber is supposed to set a monthly data budget, whereas he selects a monthly amount and prepays 10$ per GB. At the end of the month, the amount of unused data is credited back for 1c / MB towards the following month. The user can change their budget on a monthly basis. Only cellular data is counted towards usage, not wifi. That's simple, easy to understand and after a little experimentation, will feel very natural.
3. No contract, no commitment (except that you have to buy a 600+$ Nexus phone).
4. You can send and receive all cellular texts and calls using Google hangouts on any device.
5. Data roaming is same price as domestic but... see drawbacks

Here are, in my mind, the biggest drawbacks with the service as it is described.

1. The first big disappointment is that the service will run initially only on Google's Nexus 6. I have spoken at length on the dangers and opportunities of a fully vertical delivery chain in wireless networks and Google at first seems to pile up the drawbacks (lack of device choice) with little supposed benefits (where is the streamlined user experience?).
2. "Project Fi connects you automatically to free, open wifi networks that do not require any action to get connected". I don't know you, but I don't think I have ever come across one of these mysterious hotspots in the US. Even Starbucks or MC Donald free hot spots require to accept terms and conditions and the speed is usually lower than LTE. 
3. Roaming data speed limited to 256 kbps! really? come on, we are in 2015. Even if you are not on LTE, you can get multi Mbps on 3G / HSPA. Capping at that speed means that you will not be streaming video, tethering or using data hungry apps (Facebook, Netflix, Periscope, Vine, Instagram...). What's the point, at this stage, better say roaming only on wifi  (!?).

In conclusion, it is an interesting "project", that will be sure to make some noise and have an impact on the already active price war between operators in the US, but on the face of it, there is too little innovation and too much hassle to become a mass market proposition. Operators still have time to figure out new monetization strategies for their services, but more than ever, they must choose between becoming wholesaler or value added providers.

Impact of Iliad's purchase of T-Mobile

Last month, I was musing about a world where wireless voice and messaging ARPU would be 0$.

While many are discovering the bid by Iliad to take over T-Mobile US, I have been following the company for nearly two years in its successful market introduction in France.

I thought it would be interesting to have a look at what has been the impact to date of Iliad on the French mobile market as a reference point.


Iliad launched a mobile service in France in January 2012 under the brand free Mobile. The offer was simple and a perfect disruption to the highly-regulated market. Building on their broadband payTV set top box offer, Iliad secured 3G and 4G licenses from the french regulator and started offering for free mobile services to their payTV customers.

The offering

Shortly thereafter, the company launched a disruptive offer: 19.99 euros per month for unlimited national (all) and international (fixed line) voice calls , unlimited text and picture messages in europe, 3GB of data in 3G and 20GB in 4G.
To accelerate their customer acquisition for the moderate users, the group launched in 2013 a no contract 2 euro per month deal for 2 hours national and international voice calls, unlimited text and picture messages in europe, and 50MB of data.

The results

This disruption was a commercial and popular success for the company but a disaster for the incumbents. 
Dominated by Orange, followed by SFR and Bouygues, the market was deeply disturbed by this introduction.

In two years, here is the impact of Iliad on the french market:

• Iliad as of March 2014 counted 8.6 million subscribers representing 13% market share and generating 1.2 billion euros of revenue.
• Iliad in 2014 covers 50% of the french population in 4G and 75% in 3G.
• Iliad's network quality has been rated worse of all French operators but the company ranks first in customer satisfaction.
• Average turnover by mobile operators decreased by 11% in 2012 and 13% in 2013 and net income by 20%
• Average Revenue Per User (ARPU) has decreased by 22% 
• Collectively, operators increased their CAPEX investments to 7.3 billion euros in 2013 (excluding licenses).
• Collective free cash flow has decreased by 40%

Conclusions

Of course, it would be difficult to draw a direct parallel between the successful introduction strategy of Iliad in France and what would happen if they purchased T-Mobile in the US. Nonetheless, Iliad is probably the company that has acquired the most customers in the shortest amount of time of all wireless operators globally, while focusing on what matters most: customer satisfaction. Of course a disruptive pricing strategy was the main vehicle for introduction, but ease of use, with no-contract offers, unlocked phones packaged or not with subscription were a large part of the company success as well. 

The lessons to draw here are that network operators need to prepare for a world where ARPU can drastically reduce while structural investments increase. Flexibility, elasticity but more importantly a customer centric approach will make the difference.

The themes are further addressed and analysed in my latest report to be released in September: SDN / NFV in wireless networks.