Like Uber for Wireless…

Ever since the news broke that Google is planning to offer a wireless service, I’ve been terribly intrigued. The latest tidbit that Google’s system will choose networks on an application-by-application basis made it all come together for me. Google is doing a small trial, with limited scope, for just one lightly-used phone…which could transform the wireless industry. And if that’s not a big enough deal, as goes wireless in the next decade, so goes the Internet.

I hate “It’s the X of Y” comparisons, but I can’t think of any better way to describe Google’s model than the following: It’s like Uber for wireless.

Forget about taxis and disruption and crazy valuations and ethical lapses. What’s most powerful about Uber is the way a smartphone app, backed by big data analytics, restructures the physical world. You touch your phone, a car appears, and at the end of the month there’s a charge on your credit card. Matt Cohler captured this best with his concept of a mobile apps as a remote control for your life. It’s why Tim O’Reilly very perceptively labeled Uber as a leading example of the Internet of Things: the cars become the networked devices and the phones are the sensors. That’s a big opportunity.

Control the app, control the objects, control the data…
and suddenly what was a market becomes a private service.

If done well, this “industry as a service” model provides magical experiences for users while re-engineering the value chains of multiple business sectors. Think of how iTunes was the pivot point that put Apple on the road to unimaginable riches (and conversely, what it did to the music industry). And that was before the vastly greater scale and speed of today’s mobile ecosystem.

Why Google, Why Wireless, Why Now

The challenge to Google, and every other company that lives on top of the Internet, is that they don’t control the physical infrastructure out to end-users. They need to rely on network operators. Those carriers have different business models, different cultures, and different ideas about who should extract the bulk of the value from the ecosystem. Hence the titanic struggles over network neutrality, for example.

Google and the other major “edge” providers were able to remove one source of carrier control by building their own data centers and linking them into cloud systems through private connections. In essence, they built what computer scientists from the 1960s envisioned as the future of the communications industry— the “computer utility”— before the carriers themselves.

The problem is that even with vast resources and vast dark fiber capacity, Google doesn’t control the last mile. The capital expenditures to wire every home in America are, in fact, one of the few things even Apple couldn’t afford with its massive cash horde. (In 2010, the FCC put that price at $300 billion for a national fiber network.) Wireless networks involve similar-scale expenses for spectrum licenses and towers. Even more concerning are the operating expenses, maintenance requirements, and customer support headaches that tech companies run away from like the plague.

So if Google and its compatriots can’t replace the last mile, what can they do? They can push out as far toward the customer as possible, by invading the device market (Android). They can prod the incumbents by building alternatives in a few markets (Google Fiber). And they can push regulators to police discriminatory practices by network operators (network neutrality).

Yet none of these changes the fundamental business or technical dynamics
of the access market. Google’s wireless play just might.

What we know about Google’s service is that it will be a mobile virtual network operator (MVNO), which means Google will lease capacity from established carriers (Sprint and T-Mobile). It will seamlessly switch between those 3G/4G cellular connections and WiFi hotspots. Almost all smartphones today can switch from cellular to WiFi, but a new generation of niche services like Republic Wireless, invert the relationship. WiFi is the primary connectivity, with transparent fall-back to cellular when needed. The advantage? Cheaper access, better reliability, and avoidance of congested cellular links.

Google can kick this WiFi-first model up several notches. It has the financial leverage to do deals with aggregators such as Boingo and the cable operators who control over 10 million WiFi access points. It has the data and the analytics chops to optimize service quality. It can do more seamless hand-offs because it controls the phone operating system. It can advance the development of new wireless technologies and approaches like white spaces, cognitive radio, and balloons (Project Loon), which supplement and potentially supplant WiFi. It can even do fine-grained optimization between classes of applications: Streaming video goes over one connection; email and texts go over another. This means Google’s service will initially be limited to Nexus 6 devices, but there’s no reason it can’t expand if the proof of concept is successful.

Google has always said it doesn’t want to build a large carrier business. Even when they launched Google Fiber, its executives stressed the initiatives was more about sparking broadband competition and creating a new platform to experiment with services. They are saying the same about the new wireless service. I think they’re being truthful. They’re up to something bigger.

If all the world’s wireless transmitters become inputs for a cloud-enhanced smart device, costs dwindle and innovation opportunities expand commensurately. Google doesn’t need to be the one to monetize and scale Wireless As a Service. Others could build the thing; Google just needs to prove out the model, and ensure its money-printing engine of search advertising goes along for the ride.

Wireless is in many ways the next stage of the internet, and it’s also bigger than the internet. We’re talking five billion phones and tablets worldwide, and ten times more non-personal connected devices. Personal computers in homes and offices, which used to support the entire internet, are an afterthought compared to those numbers. And wireless devices can do things no PC could dream of: track your location, track your physical exertion, pay for services in the real world, take photos, take videos, augment reality, create a continuous social networking and communications bubble around you throughout the day… and so on, and so on.

It’s not such an exaggeration to say that
who controls the wireless, controls the universe.

The Uber-ization of wireless means the control point shifts from the network operator to the handset. Cellular connections don’t quite become “a poorly debugged set of device drivers,” but wireless carriers move toward the one identity they fear most: dumb pipes. They get paid for their trouble, perhaps handsomely, but they’re not in control of their destiny. The carriers become like Uber drivers: necessary and rewarded until the instant more drivers or, ultimately, self-driving cars make them expendable.

Google’s model only works if some national wireless operators are willing to sell it wholesale capacity. Thankfully, and thanks in large measure to Obama Administration antitrust enforcement, we have four major wireless carriers in the U.S., not two. Guess which ones are the underpinnings of the MVNO industry?

More than Disruption

Conversations about Uber invariably describe the “disruption” of the licensed taxi business. Disruptive innovation, based on Harvard Business School professor Clay Christiansen’s work, is a powerful concept, but it doesn’t fully describe what’s going on in this case.

Uber isn’t innovating the next stage of the taxi industry in the manner of Christiansen’s mini-mills and disk drive manufacturers. It’s creating an entirely new business. Already, Uber in San Francisco generates more than three times the annual revenue of the whole taxi industry in the city. This doesn’t guarantee Uber will grow into its valuation, or scale successfully, or overcome its legal challenges, or beat back competitive threats. It just means the company is doing something considerably more radical than is fully appreciated. A “remote control for car rides” is a much bigger idea than “a better taxi dispatch service.”

The same with wireless. While it’s fun to speculate about what Google’s grand wireless experiment might mean for carriers, that’s not the main story. Google’s success has relatively little to do with AT&T and Verizon’s failure, even if those companies are the biggest impediments to the world Google hopes to create. The non-industrial Internet of Things, which is what we’re talking about here, is an opportunity in the trillions of dollars financially, and unquantifiably big in its potential impact on our lives.

Wireless is the enabler for a world in which physical objects are also tokens and data sources for coordination by networked systems. The more open and interconnected that world, the more value and innovation and human flourishing it ultimately nurtures. To be sure, Google’s record on openness is somewhat mixed (especially in recent years), but it’s far more comfortable in an “out of control” environment than the carriers. Its wireless service is the thin leading edge of a shift that could change everything.

Not a bad potential impact for a tiny experiment.