Yesterday Google officially announced Project Fi, its much anticipated wireless service, which I’ve previously blogged and tweeted about during its pre-announcement rumor/leak phase. Now that more details, including pricing, are available directly from Google, an updated post seems in order, especially following recent posts about newly launched municipal Wi-Fi services in NYC and Boston (later on this post I’ll consider how these two developments may be related and synergistic).
As expected, Google’s wireless service will route user traffic over a mix of Wi-Fi connections and, via MVNO arrangements with Sprint and T-Mobile, the two carriers’ cellular networks. This “three network” approach alone makes the service pretty unique. In a blog post yesterday, VP of Communications Products Nick Fox explains:
As you go about your day, Project Fi automatically connects you to more than a million free, open Wi-Fi hotspots we’ve verified as fast and reliable. Once you’re connected, we help secure your data through encryption. When you’re not on Wi-Fi, we move you between whichever of our partner networks is delivering the fastest speed, so you get 4G LTE in more places…If you leave an area of Wi-Fi coverage, your call will seamlessly transition from Wi-Fi to cell networks so your conversation doesn’t skip a beat.
The Project Fi FAQ page explains further that its “software is optimized to not put extra strain on your battery by only moving you between networks when absolutely necessary.”
Also as expected, Project Fi’s multiple-network functionality will initially only be available on Nexus 6 smartphones, via a special SIM card. The device costs $649-$699, depending on its storage capacity, with a no-interest, no-fee option to pay for it over 24 months (an approach similar to what most cellular carriers now offer to their customers). Under this plan, the monthly cost for the device is $27.04-$29.12.
Though the multi-network functionality will initially only be available on the Nexus 6, Google aims to make it easier to switch not only between networks, but also between devices. As its Project Fi announcement explains:
Talk, text, and check voicemail with the screen nearest you. Your phone number now works with more than just your phone. Connect any device that supports Google Hangouts (Android, iOS, Windows, Mac, or Chromebook) to your number. Then, talk and text with anyone—it doesn’t matter what device they’re using.
While much of the above was previously confirmed via rumors and leaks, I hadn’t seen anything about Project Fi pricing until Google officially announced the service, which has a pretty simple fee structure.
For a base price of $20 per month, Project Fi customers receive the following:
- Unlimited domestic talk and text
- Unlimited international texts
- Low-cost international calls
- Wi-Fi tethering
- Coverage in 120+ countries
The above graphic from arstechnica illustrates that, although Google’s pricing becomes less competitive the higher the monthly data allowance, it is the least expensive service for a 1 GB tier of service.
Though it would not change Verizon’s position as the highest-priced provider at 1 GB, it’s worth noting that customers paying full price for their phone would pay Verizon only $55 for this package (the $70 price reflected in the graphic applies to customers buying a subsidized phone under a 1-2 year contract). Since Google’s customers will be purchasing non-subsidized Nexus 6 devices, this $55/mo. price provides a more accurate apples-to-apples comparison than the $70/mo. figure included in the graphic. Based on a review of AT&T’s website, it looks like its comparable 1 GB package would cost $50/mo. for customers buying non-subsidized phones, which puts both dominant carriers well above Project Fi’s pricing for a 1 GB data tier.
Pay for what you use: eliminating “Wireless Waste”
But there’s more to the pricing comparison than just this base monthly charge. Adding to the attractiveness of Google’s pricing is the way it deals with under- and over-usage in relation to a customer’s monthly data allowance. Unlike cellular carriers (particularly Verizon), Google charges you only for the actual data you use, refunding money if you use less than your monthly allowance, and charging you only for the actual data usage that exceeds the amount you paid for. For example, if you subscribe to the 1 GB tier and use only 600 MB in a given month, you’d be refunded $4. And if you use 1.2 GB, you’d be charged only an extra $2.
This contrasts with the use of sometimes steep overage fees (e.g., as much as $15/GB, with no prorating) by Verizon and AT&T. And while the latter allows users to rollover unused data for one additional month, this falls far short of the simple and straightforward refund approach taken by Google. And even T-Mobile, the “Un-Carrier” does not have a refund option for unused data, though it does allow customers to build up a “Data Stash” that can extend the rollover period up to 12 months.
Google’s “pay only for what you use” approach to pricing could prove significant both as a competitive tool and as a driver of customer savings. Regarding the latter’s potential scope, the WSJ article breaking the Project Fi launch story offered one numerical reference point:
A 2013 study by a company called Validas, which analyzes consumers’ bills to help them choose the right plan, says smartphone users typically waste $28 each month on unused data.
Though I haven’t found any information about how Validas derived this number, I did find a January 2013 press release from the company that cited a total annual “Wireless Waste” of $45 billion, spread over a base of 130 U.S. smartphones. That averages out to $28.85/mo. per smartphone, in line with the figure cited by the Journal.
If this Validas estimate of “the difference between what you pay for on your mobile plan and how much of it you actually use” is even in the ballpark of what’s occurring in today’s market, then Google’s “pay only for what you use” approach to pricing could add significantly to the downward pricing pressure the industry has experienced over the past year or so, driven mainly by aggressive marketing from T-Mobile and Sprint.
Combining Project Fi with Free Muni Wi-Fi
Having recently written about “second-generation” municipal W-Fi networks being deployed in NYC and Boston, I find myself considering the significance of Project Fi in the context of these projects (as well as other developments discussed in this multipart series of posts focused on unlicensed spectrum).
Toward the end of my post about New York’s LinkNYC Wi-Fi project, I said:
Assuming LinkNYC works roughly the way it is envisioned, it raises the question of how many of NYC’s millions of mobile users will, over time, decide to cancel or downgrade their cellular plans. A related question is how carriers will respond to the widespread availability of free and very fast Wi-Fi service (and the network’s other free services) on the pedestrian- and mobile device-filled streets of New York.
Another set of questions relates to whether the project can realize its ambitious ad revenue and technical performance goals. If it does (or even gets close), this raises additional questions about whether and how the LinkNYC model can be adapted to work in other cities and, if it can, what that means for the future evolution of the communications sector.
I wrote this a few days before Google announced the features and pricing for Project Fi. Now that these have been made public, I’m inclined to include them in this consideration of future scenarios.
For example, in an expanded “Muni Wi-Fi + Project Fi” scenario, we’d have:
- Widespread free high-speed connectivity available from municipal Wi-Fi networks in NYC, Boston and perhaps an expanding number of other U.S. cities;
- A $30 Project Fi service that could make heavy use of this free Wi-Fi connectivity, while providing a 1 GB allowance for using cellular data networks in areas where Wi-Fi isn’t available, and using a simple and fair “pay only for what you use” approach to pricing.
Assuming Project Fi and these second-generation municipal Wi-Fi networks provide the kind of service they are targeting (admittedly these remain big “ifs” at this point in time), this combination strikes me as potentially quite disruptive. This is especially true with respect to the two dominant cellular carriers, who probably have been capturing the lion’s share of what Validas refers to as Wireless Waste.
Of course these carriers will not stand still in terms of how they respond to Project Fi. And, in its current configuration, Google’s new service remains competitively weak on a number of fronts, including geographic coverage, support for multiple devices, and packages geared toward families and others attracted to shared-usage and heavy-usage data plans. Of course, like the carriers, Google also won’t be standing still in terms of what Project Fi has to offer and how it is priced.
All of the above (and other trends discussed in this series) suggests a future marked by increased consumer choice, innovation and healthier competitive dynamics in the wireless communications market, with unlicensed spectrum playing a key enabling role.