The search giant has an enormous reach and the potential to disrupt existing players while changing how a given field operates. It's fair to say the company has done that with its Google Fiber Internet service, which has forced Comcast, AT&T, and others to increase the speeds of their broadband Internet offerings.
It's also reasonable to point out that not every initiative launched by the search giant proves transformative. For every Chromecast or Android operating system that scores big, the company has a few semi-duds like its Nexus phones.
Its latest offering, the Google Fi wireless phone service, has the potential to go either way. At first glance it's perhaps a tad underwhelming, but in the long run Google has shown an ability to use its products to force changes by the existing industry leaders.
What is Google FI?
Fi represents Google's attempt to enter the wireless market in the United States with a low-cost service that operates over Wi-Fi whenever possible. When no connection is available over Wi-Fi, the service will use the Sprint (NYSE:S) or T-Mobile (NASDAQ:TMUS) network -- whichever happens to be stronger in that location.
It's not a revolutionary service. In fact, it's very similar to what FreedomPop and Republic Wireless already do, except those two low-cost carriers strictly rent space on the Sprint network.
Google described Fi in the blog post announcing its launch as a partnership with wireless carriers (in this case Sprint and T-Mobile), similar to the way the company has developed its Nexus tablets and phones:
Project Fi enables us to work in close partnership with leading carriers, hardware makers, and all of you to push the boundaries of what's possible. By designing across hardware, software and connectivity, we can more fully explore new ways for people to connect and communicate.
Linking Fi to Nexus is an important admission, as in the past, Google executives have acknowledged that the goal of the Nexus hardware was to force innovation, not to become a dominant smartphone maker.
In a speech at Mobile World Congress in Barcelona, Google Senior Vice President Sundar Pichai laid out this philosophy when talking about the company's efforts in consumer electronics.
"It's a bit misunderstood outside [the company] as to why we do Nexus devices," he said. "All innovations in computing happen at the intersection of hardware and software. For you to drive the next generation, you need to do both closely together."
Fi is going to be offered by invitation-only at launch and solely on Google's Nexus 6, which costs around $649 when not subsidized by a carrier. Thus, it seems very likely that Fi will not be a big hit out of the gate. It's possible that Google will add more devices going forward, but the launch plan is a clear attempt to keep Fi small.
How Fi is priced
Google has come up with a somewhat unique price structure for Fi that refunds customers for data that they do not use. Aside from that wrinkle -- which is essentially a variation on T-Mobile allowing its customers to carry over unused data -- Google's plan is in line with other low-cost carriers.
Google charges $20 a month for talk, text, Wi-Fi tethering, and international coverage in 120-plus countries. On top of that it charges a flat $10 per GB for cellular data while in the U.S. and abroad.
"Since it's hard to predict your data usage, you'll get credit for the full value of your unused data," the company wrote. "Let's say you go with 3GB for $30 and only use 1.4GB one month. You'll get $16 back, so you only pay for what you use."
Google is pushing the market
While Google may not be trying to conquer the wireless market, it is clearly trying to push it forward. Fi is not a revolutionary service, but it could put pricing pressure on industry leaders AT&T and Verizon. Fi is not cheaper than FreedomPop or Republic Wireless and it's not really much less expensive than certain plans from T-Mobile and Sprint.
It is, however, a big public rollout for phone plans that rely on Wi-Fi. Pushing that agenda forward is likely exactly what Google is hoping to do.
Daniel Kline has no position in any stocks mentioned. He has no interest in using a Nexus phone. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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