The most recent iOS update from Apple added a nifty new feature for Sprint (NYSE:S) subscribers: Wi-Fi calling. The update adds the iPhone to the long list of Android phones for which Sprint supports Wi-Fi calling. One feature that's missing, however, is the ability to hand off calls from Wi-Fi to cellular like T-Mobile (NASDAQ:TMUS) offers, so calling from Wi-Fi may result in some dropped calls.
When Apple unveiled the iPhone 6 and iPhone 6 Plus in September, it touted its ability to hand off Wi-Fi calls to VoLTE calls seamlessly as the user moved between the areas served by them. The newest iteration of Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Android -- Lollipop -- released in October supports "improved network handoffs" as well. Ultimately, however, it comes down to the carriers' ability to support seamlessly transferring the call from Wi-Fi to cellular.
This is important for two reasons. The first is that T-Mobile and Sprint are competing with two carriers with much larger networks, making Wi-Fi calling more important for them. Second, it may cause Google's new MVNO service, which taps both Sprint's and T-Mobile's networks, to favor the latter's network.
Please wait while I transfer your call
Sprint and T-Mobile were the first two major wireless carriers in the U.S. to support Wi-Fi calling. The lack of network coverage, especially in rural areas, made it a necessity to compete with AT&T and Verizon. Sprint and T-Mobile usually pay roaming fees to use the bigger networks to connect their customers. Getting more customers to connect over Wi-Fi saves those roaming charges.
But users may be hesitant to turn on Wi-Fi calling if they know it's going to result in a dropped call should they leave their router's coverage. The problem stems from Sprint's undeveloped LTE network. The key to transferring a call seamlessly is to treat the voice call like any other data connection, then just flip a switch to route the data. This is easily done with LTE by utilizing Voice over LTE, or VoLTE.
So, Sprint is getting hit twice by its poor network. It's paying to connect calls through Verizon's network, and when it tries to offload users to Wi-Fi, they're hesitant again because of its network. The only solution is to build out the network faster, but considering the company just fired thousands of employees last fall, including hundreds of network engineers, it doesn't look like that's in the plans.
Competing with T-Mobile for wholesale dollars
Google is reportedly working on an MVNO that will buy network capacity from both Sprint and T-Mobile. More importantly, however, Google plans to prioritize Wi-Fi hotspots over a cellular connection. This of course saves money for Google (just as it would if Sprint and T-Mobile customers used Wi-Fi calling and data).
But if Google tries to initiate as many calls as possible on a Wi-Fi network by default, it could end up dropping those calls if it tries to hand them off to Sprint's network. The same is true if it starts on a cellular network and then tries to hand off to Wi-Fi. That's why it's more likely Google will prefer T-Mobile's network over Sprint's.
While Google has said that it plans to keep its MVNO service small scale, it could become a surprisingly big business or encourage other businesses to offer a similar service. The fact is that Sprint is supporting a business that could cut into its subscriber base, and it could see very little in return from wholesaling its network capacity.
Bottom of the pack
Sprint has a lot of network capacity and can support coverage, but a lack of support for VoLTE has left it well behind the competition. Even when it admits that its network isn't up to par with the competition by rolling out Wi-Fi calling, it can't implement it as well as the competition due to constraints on its cellular network. The latest update is that the company is aiming for a rollout of VoLTE by the middle of this year, but progress will be delayed by its layoffs.
In the meantime, Sprint continues to lose phone subscribers, with tablet and connected device subscribers helping to offset the losses. The MVNO service from Google is partially aimed at tablet owners who don't know how much data they'll use every month and don't want to be caught with too little or paying for too much. It could attract a large number of tablet owners that way (if it's not constrained by hardware), much to the detriment of Sprint.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Verizon Communications. The Motley Fool owns shares of Apple, 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.