Weekly Update

An MVNO could be Google’s latest plan to disrupt mobile

The European rumor mill heated up last week with reports that Google is toying with an MVNO-like service for its employees. Google isn’t commenting, and one conflicting story even claims that the initial report was a hoax. But Google is aggressively pursuing just about every other segment in mobile, and tinkering with an MVNO could be the first step toward disrupting the mobile market in a big way.

The Nexus One and Google Voice: designed to disrupt

Offering its own service would be a bold play, but Google has shown no fear in challenging existing mobile power structures. After shaking up the industry with Android, Google took a bold swing at the established handset-distribution model almost two years ago with the Nexus One, an unsubsidized handset that wasn’t tied to a single carrier and was initially available directly from Google rather than through carrier channels. The HTC-designed gadget was distributed by Google and marketed on its home page before Google acquiesced and made the phone available through T-Mobile USA retail outlets.

And while the Nexus One may have been the most egregious example of Google’s chutzpah in mobile, it isn’t the only one. As Om wrote more than two years ago, Google Voice “essentially reduces the cell phone carrier to a dumb pipe” by enabling users to make calls within the app as well as send text messages, access voicemails and manage their contacts and conversations. Google has continued to build out its offering by allowing users to port their mobile numbers to Google Voice and, earlier this year, inking a deal to integrate the app across Sprint’s lineup of both smartphones and feature phones. Google Voice amassed an audience of 1.4 million in just seven months after its 2009 launch; the company has declined to discuss how much it has grown since.

These initiatives have seen mixed results, but all share a common strategy: Gently push the envelope of the mobile industry when possible, pull back when necessary, and stay focused on the long haul. The Nexus One distribution strategy has been dubbed a “failed experiment,” but it was likely just the initial attempt. The reported MVNO in Spain might be the first real step.

Why a Google MVNO could work

The MVNO space in the U.S. is littered with casualties, from high-profile flops such as Disney Mobile and Mobile ESPN to Amp’d, a glorious debacle that raised $360 million in funding before tanking. But most of those failures were based largely on branding and content. Google could differentiate itself with an offering built on useful services such as Google Voice and Google Wallet. And it could market the service as an edgy, feature-heavy offering for tech-savvy power users — an area that was overlooked in the era of youth-oriented MVNOs. The move could create a new revenue stream as well as build a fertile user base for Google’s ever-growing portfolio of mobile apps and services.

That kind of bold move risks angering Google’s mobile partners, of course. Google would have to move slowly and be ready to retreat (as it did with the Nexus One) if the costs outweigh the potential gains. But there are operators who might smile through clenched teeth at the thought of supporting a Google MVNO: Deutsche Telekom could find such an arrangement attractive for its struggling T-Mobile USA business if the AT&T acquisition ultimately fails. Clearwire, which has recently considered providing capacity for carriers in addition to Sprint, could also be a possibility.

Google isn’t going to spring a U.S. MVNO in the next few months. But as it demonstrated with the Nexus One, it isn’t afraid to patiently dismantle the mobile industry one brick at a time. Spanish operators may soon see the latest example of that with a Google MVNO. And U.S. carriers could be next.

Question of the week

Could Google launch a successful MVNO?