With Sprint and T-Mobile -- the third and fourth largest U.S. wireless carriers -- Google would become a Mobile Virtual Network Operator (MVNO), able to market potentially cheaper and faster services to consumers and small businesses for voice and data.
But that's not all.
Google's ultimate goal will be to expand access to the Internet and thereby bring more users to its search engine and advertising - its core business.
The MVNO move allows Google to expand beyond fast Google Fiber, with Wi-Fi hotspots connected to Google fiber optic cables and, seamlessly, to cellular service over both Sprint and T-Mobile. That will allow mobile users to move about while keeping a persistent connection to various Google services, from Search to Maps to YouTube to Google Office and others not yet conceived of.
Being a MVNO could also be a boon to Google Voice and the Voice-over-IP capability of Google Hangouts.
Google also wants to gain unlicensed access to various bands of wireless spectrum, including high-frequency bands, that would further its long-term interest in connecting smart devices in homes and cars with smartphone users. In a recent filing to the Federal Communications Commission, Google said it could see frequencies above 24GHz as useful for wireless broadband access by high-altitude balloons or unmanned vehicles, as well as cars and drones.
"Surely this [MVNO deal] isn't Google wanting to be a traditional MVNO," said MachNation analyst and CTO Dima Tokar. "We believe Google will start offering Google-branded Internet of Things services in the home and cars. Google's acquisition of Nest, its investment in the wearable market, development of Android-powered in-car systems and self-driving cars combined with a continued interest in linking all aspects of consumers' lives is behind this IoT MVNO play."
Industry reaction
Google and Sprint refused to comment on the MVNO reports and T-Mobile did not return requests for comment. Verizon Wireless Chief Financial Officer Francis Shammo said Thursday in an earnings call that Google's move is "just another very prime example of the intensity and the competition around this industry, the availability of the open networks and access to the networks. And this is why this industry does not need to be regulated."
Noting that Google had already entered the fiber field and other initiatives, Shammo added, "Their whole purpose is to increase speeds so that people can do more search."
Verizon will "wait to see" how Google executes on the MVNO, he said. But Shammo noted that MVNOs have been around for 15 years and are "complex" with the need to deal directly with consumers through customer service call centers and help centers. Google is "just another competitor as we look at it," he said.
It's not easy, being an MVNO
Roger Entner, an analyst at Recon Analytics, said running customer services for a Google MVNO would indeed be complex and expensive. "Google is opening itself up to a Pandora's box of complications," Entner said. "FCC regulation is the least of their worries."
If Google only provides online help and customer service to its MVNO users, it runs the risk of alienating older customers more accustomed to call centers, he said. And if it only sells Android phones or Nexus-branded phones, then it could be accused of bias against iPhone users, which could bring it under scrutiny by the FCC, Entner added. Android phones and iPhones sell at roughly equal rates in the U.S.
Most MVNOs have failed, he said, noting disappointing attempts by ESPN and Disney to enter the space years ago.
"Both ESPN and Disney thought people would come in droves and they underestimated the investment and work involved and overestimated the profits they could achieve. The only MVNO that makes money and has scale is Tracfone," he said.
Tracfone Wireless, a subsidiary of Mexico-based America Movil, is now ranked the fifth-largest carrier in the U.S.
Costs to customers with Google service
Entner estimated the least that Google could charge wireless customers for unlimited voice and text and up to 2GB or 3GB of data per month would be $30. "Their ability to underprice competitors is not that significant," he said, noting that Straight Talk at WalMart costs $45 for unlimited voice and text and 3GB of data. Bu data speeds throttle down to 128 Kbps after the 3GB is used up.
He said it would cost Google $5 to $7 per minute per customer on a customer service consultation, further cutting into Google's profit -- assuming Google cares about making a profit on the MVNO venture, given its investments in various research efforts like Google Glass.
Also, as a wholesale customer of Sprint and T-Mobile, Google will have "no impact on customers having coverage wherever they go," Entner said. "As a virtual network operator you don't have all the abilities of the network operator."
A net positive for customers
Despite his many reservations about a Google move, Entner said the long-term impact remains unclear. "Another competitor like Google is always good for customers, and a different perspective helps everybody," he said. "It certainly gets Google's skin in the mobile game, especially as the Internet becomes more mobile. It even helps them with OS development of Android."
Gartner analyst Bill Menezes said he expects Google to shape service plans that drive traffic to Google Apps and services, but added, "it's hard to determine whether that effort creates a lot of pressure on AT&T and Verizon." Google could offer free data for such services as YouTube, much as T-Mobile already does for music streaming.
One area Google might capitalize upon is selling cheap 4G cellular hotspots over either Sprint or T-Mobile networks to circumvent wired Internet broadband providers in homes and offices, Menezes said.
More benefits to Google
With a Google MVNO, Google is also positioned to gain more information about customer usage patterns through the carriers.
"I think Google is really after more control of their advertising platform and the ability to concentrate ads based on your particular usage, which they have more information about if they offer their own wireless service," said Jack Gold, an analyst at J. Gold Associates.
"The MVNO also could have a major impact on Amazon, which views mobile users as a target for their own services like Amazon Prime," Gold said. "In fact, the MVNO maybe have greater long-term implications on Amazon than on Verizon or AT&T."
One mobile scenario caught the eye of officials in Kansas City, Mo., where Google Fiber was first introduced in 2012 and now is offered to both residential and business customers. There's the potential for Google to work with Cisco in connecting smart city sensors via wireless and fiber near a two-mile streetcar line under construction in downtown.
In theory, a Google MVNO user could roam easily from a Sprint or T-Mobile cellular network onto a Wi-Fi hotspot that is connected to a Google Fiber cable for fast Internet connections to an array of specialized apps and services catering to Kansas City residents, visitors and businesses.
"The Google MVNO is relevant to Kansas City's future, but we haven't [been] directly involved in the relationship," said Rick Usher, assistant city manager for Kansas City, Mo. "It looks like a logical market step for Google, because we know they love mobile."