Alphabet's (NASDAQ:GOOGL)(NASDAQ:GOOG) mobile virtual network operator (MVNO), Project Fi, just got a promotion. Besides getting renamed Google Fi to better reflect that it's part of the Google family of services, the discount mobile phone plan recently added support for more phones. While that means yet more competition for the heavy hitters in the industry -- like Verizon (NYSE:VZ), AT&T (NYSE:T), and T-Mobile (NASDAQ:TMUS) -- the disruption for investors has thus far has been minimal. It does, however, underscore the importance of innovation in the world of telecom.

What's an MVNO?

MVNOs like Google Fi don't operate their own mobile networks; instead, they make use of cell towers from network operators through lease agreements. For example, Google Fi customers are actually on T-Mobile, Sprint (NYSE:S), and U.S. Cellular's (NYSE:USM) networks.

As with other MVNOs, Google Fi can offer big subscriber discounts compared with its bigger peers because it isn't burdened with network maintenance. There are drawbacks, of course: For one thing, MVNO subscribers don't get the same network speed preferential treatment as direct network operator subscribers do. Phone options on MVNOs can also be limited, as is the case with Google Fi. Google is expanding its lineup, though.

After testing under the moniker "Project Fi" the last few years, the newly rebranded Google Fi now supports most Android devices, though Google Pixel phones are still listed first and come with big discounts for new sign-ups. For those looking to bring iPhones with them, Google Fi now supports Apple (NASDAQ: AAPL) products. Setup requires a little extra legwork on an iPhone, and the Fi website says it's still in beta testing, but the option is nevertheless there.

How Google Fi affects investors

Expanding Google Fi's services makes perfect sense from Alphabet's point of view. It's a new source of revenue, albeit a small one in comparison to the company's online advertising empire, and it's a way to promote the Pixel hardware lineup and all of the software services it supports. But what about mobile network operators?

At first glance, the advent of the MVNO may seem like a major disruptor for the telecom industry. It isn't necessarily a loss of business, though. As mentioned earlier, MVNOs buy access to mobile operators' networks. That means extra revenue from licensing out unused network capacity. T-Mobile, the primary network on which Google Fi piggybacks, separates its branded network subscribers from wholesale subscriptions it sells through service providers like MVNOs. As of the end of the third quarter, T-Mobile netted over 1.2 million new wholesale connections in the year, compared to a net 3.4 million branded connection additions so far in 2018.

One could argue that licensing out network space is counterproductive, but growth is growth. Plus, it's not like the current 4G network is a new thing. Nearing a one-decade anniversary, 4G has helped revolutionize mobile data consumption with the ability to stream video and other data-intensive online content via a phone, but overall growth has slowed dramatically in the past couple of years. Network operators have gotten increasingly competitive on pricing, and MVNOs have done their fair share to help keep pricing in check, too.

Besides, network operators have begun turning their attention to the next-gen 5G network, with the first commercially available version of 5G launching in October. As the switch to 5G gains momentum in the years ahead, the new network will be a competitive advantage network operators have over discounted MVNO upstarts. For those looking for a cheap phone service, MVNOs could continue to advance -- but mobile operators will likely keep the newer and more lucrative 5G services for themselves for some time.

Thus, rather than viewing Google Fi as a serious threat, telecom investors should view the service as healthy competition that is helping foster innovation in the industry.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Nicholas Rossolillo and his clients own shares of Alphabet (C shares) and Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.