SNL Kagan reported Monday that both Google and Dish Network have submitted bids to buy T-Mobile now that AT&T’s has ceased its overtures toward the country’s No. 4 operator. I’m not going to debate the veracity of these rumors here – SNL’s sources weren’t named — but I will say one thing: The idea of Google becoming a wireless carrier is absolutely ridiculous.
There’s no arguing that Google has big ambitions to expand further into the wireless space. Not only did it build an overnight sensation with Android, it’s exploring the cutting edge of handset technologies with its Nexus line and will broaden its device scope with the purchase of ailing Motorola Mobility. the search giant is one of the biggest players in mobile apps, and remains a looming presence on the mobile Web. So why wouldn’t it want to complete that dominance by controlling the pipes that the deliver its services?
There’s a big difference between delivering applications, services and devices and selling raw connectivity. Nowhere does this difference shine brighter than Google’s relationship with Verizon Wireless. Verizon benefits from the traffic that Android and Search deliver, and Google benefits from all of the Android devices that Verizon sells, but beyond that their common ground disappears, as the recent dust-up over Goggle Wallet shows. As an operator, Verizon has to carefully ration access to its network in the form of data caps and restrictions in order to make its profits. If Google were to buy T-Mobile it would be forced to do the same. As an apps and services innovator rationing bytes and bandwidth is the last thing Google wants to do.
But let’s play the hypothetical…
If Google did buy T-Mobile here are just three of many, many problems it would face:
- Schizophrenia: How does Google balance the needs of the services and devices it develops against the bandwidth constraints of the network it purchases? Video apps like YouTube and Hangout consume a massive amount of data, and Google’s developers, I’m sure, are hard at work building more powerful applications to take advantage of new 4G network speeds. Consumers will expect Google to use T-Mobile as a showcase for its newest technologies, but as T-Mobile’s lack of an LTE roadmap exemplifies, its network resources would be severely limited. Google would likely invest in alternate access technologies like Wi-Fi and white spaces to supplement its capacity cheaply, but at a certain point it runs into a wall erected by physics. The limitations of T-Mobile’s network would curb the pace of Google’s service innovation.
- A sense of history: If any company can attest to the fickle tastes of wireless consumers, it’s Google. It became a monster in the smartphone sector in the space of a few years, as Apple did before it. What happens when the tides shift? What if Windows Phone takes off like a rocket eating into Android’s market share. Does T-Mobile not sell Nokia or other WP phones? If Apple reduces itself to offering an iPhone for T-Mobile’s AWS bands, does Google ignore it? In the last decade, we’ve seen multiple titans in wireless devices and software fall, replaced by new giants, many of which have since also tumbled from their pedestals (just ask RIM, Ericsson and Motorola). What happens when Android’s star dims? Google can’t subject T-Mobile to the whims of its applications business, but if that’s the case, what would be the point of buying T-Mobile at all?
- A customer relations nightmare: When was the last time you called Google customer service? The big-iron world of wireless base stations and towers, switching offices and utility trucks is radically different from the server-centric world of Internet services. There are lots of moving parts in wireless networks and they often fail, as Verizon can attest to given its recent string of LTE failures. When the iPhone first bum-rushed AT&T’s network, how much vitriol was directed at Apple for its un-ambitious choices in 3G technology and its decision to sacrifice RF design for industrial design? Not much. Whether it’s a justified perception or not, tech companies like Google are the darlings of the broadband age, while the operators are the evil gatekeepers preventing mobile data services from meeting their full potential. I think the carriers have come to terms with this perception as part of the course of doing business, but I don’t think Google is quite ready to deal with millions of tweets declaiming “f#@king Google’s network is down” whenever it has a problem.
What about Clearwire, 700 MHz and Google Fiber?
I’m anticipating some push back on this post, pointing out that Google has made numerous attempts in the past toward becoming an operator. Google invested $500 million and still remains a large investor in Clearwire. It entered the 2008 700 MHz spectrum auctions and bid heavily on the 4G spectrum Verizon eventually won. And Google has launched a fiber-to-the communities project designed to bring1 Gbps connections to the home.
These are all red herrings though. In every case, Google pursued these projects not with the intention to become a legitimate wireless or broadband provider. Rather, it used its enormous resources to upset the established order in telecom, thumbing its nose at operators in the process. Google invested in Clearwire because it wanted to prop up an alternative to the walled-garden data services that operators were then offering. It bid up that 700 MHz spectrum in order to force Verizon to accept open access provisions that would clear the way for its Android services in the future. And Google readily admits its fiber project is an experiment to show broadband providers and consumers just what’s possible with a lightening-fast connection.
Google doesn’t want to be a telecom service provider. It just wants to influence carriers to adopt business models and technologies more amenable to its business plans – either by shaming them by example or using its cash to force change. If it did buy T-Mobile, Google would join the carrier club and it certainly wouldn’t be able to pull such shenanigans anymore.
I don’t claim to be prescient here. SNL could very well be right, and Google may be making a legitimate bid for T-Mobile. If that’s the case then Google is suffering from hubris, somehow believing it could be ‘different’ then the rest of the wireless industry. But if Google does buy T-Mobile it may well wind up being a bigger disaster than AOL’s failed merger with Time Warner.