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The Why Behind Google Fi

Both Apple and Google have been rumored for years to be planning to build or buy their own cellular networks. This would seem to put both companies at odds with their biggest purchasers of phones: the cellular carriers. Most phones in America are sold through subsidized or installment plans. Why rock that boat?

Google’s just-announced Project Fi seems to straddle a few different concepts, and it’s clearly an experiment. Like Google Fiber, it’s a way for Google to test something at relatively low cost, while also writing the business plans for other companies who might follow on Google’s heels. In the meantime, Google gets to collect data and shake some trees.

What is Project Fi and how might it affect your connectivity choices? Let’s start with the basics.

Fi Facts — At its heart, Project Fi is a cellular and Wi-Fi connectivity plan for mobile phones, albeit currently only for the Motorola Nexus 6 and only if you’re invited. It isn’t likely to affect iPhone users directly, but is another force exerting downward pricing pressure on cellular carriers.

The service will require a $30-per-month subscription with no commitment beyond the current month. A base $20-per-month fee includes unlimited worldwide texting and unlimited voice calls in the United States. Data is charged at $10 per 1 GB of cellular data in America and 120 other countries, and this includes Wi-Fi tethering. This is postpaid service, in which you’re billed for the current month in advance and any additional data usage in the next cycle. Google requires you sign up for at least a 1 GB usage plan, and suggests that you budget for expected usage ahead of time. However, it will refund on a prorated basis the cost of any unused data each month into the next bill. (All prices are before typical taxes charged by all

Data runs over 4G LTE in the United States. Carriers typically promise rates in the 5 to 12 Mbps downstream range with peaks as high as 40 Mbps; upstream, data typically flows at several Mbps and can peak at close to 20 Mbps. In other countries supported by the plan, throughput is throttled to 256 Kbps over 3G.

Voice calling costs are divided by Wi-Fi and cellular and whether the call takes place within the United States or elsewhere, a category that is further divided into a set of some 120 countries and the rest of the world. Here’s how it breaks down:

  • All calls placed via Wi-Fi anywhere in the world to a U.S. number are included in the $20-per-month plan.

  • All calls placed in the U.S. over a cellular network to a U.S. number are included.

  • All calls received while on Wi-Fi anywhere in the world are included.

  • All other calls incur a fee.

Using Wi-Fi anywhere in the world, including within America, to call a non-U.S. number is charged at Google Voice rates, which can be very low, such as 3¢ per minute to a mobile phone in France. In one of the 120 countries supported by roaming, inbound and outbound cellular calling to anywhere, including in the country you’re in, costs 20¢ per minute.

Google won’t allow devices with a Project Fi SIM to get on a cellular network in countries outside of those it supports for roaming, so as to avoid accidental charges. However, the Nexus 6 will work with other SIMs, including a SIM for a carrier in one of those countries. Plus, you can use Wi-Fi for calling, data, and texting in those countries, and be charged at Google Voice rates for outbound calls.

Project Fi manages all this in two parts. First, it’s an MVNO: a mobile virtual network operator. MVNOs buy access at wholesale prices from existing carriers, hence the virtual part. On the whole, MVNOs rose and fell years ago, because as carriers offered sweeter and less restrictive plans with fancier subsidized phones, the wholesalers couldn’t keep up. Many MVNOs disappeared or were purchased by carriers, such as Virgin Mobile, which Sprint acquired. About 10 percent of American cell phones subscriptions are via MVNO, but many of those are through subsidiaries of carriers based in the United States and elsewhere.

But Google’s trick is leverage, as the company is pairing cellular access with nearly ubiquitous free Wi-Fi. Google has partnered with both T-Mobile and Sprint on the cellular side, allowing 4G LTE access in America, leaning on the fact that those two networks have built out slightly different footprints. And Google has arranged access to what’s described as a million American Wi-Fi hotspots.

Google will offload calling and data to a Wi-Fi network whenever possible, and its FAQ describes these as open and free networks. As with other carriers that offer Wi-Fi calling, subscribers will also be able to call over private Wi-Fi networks to which they have access. (All data is sent via an automatically configured VPN, or virtual private network, which encrypts data between a device and a destination server elsewhere.)

Other carriers, like Republic Wireless, have inexpensive Wi-Fi-only plans or hybrid plans that lean heavily on Wi-Fi. And Cablevision recently launched a cheap Wi-Fi-only phone plan under the name Freewheel. We’ll see more of these over time.

At launch, Project Fi works only with the Nexus 6 from Motorola, which costs $649 (32 GB) or $699 (64 GB). The fee can be paid upfront or over two years of monthly payments without interest or fees; a credit check is required only for the payment plan. The same number associated with the phone can be used through Google Voice on other devices, too.

An invitation is currently required as well.

Why Fi? — Google’s service is competitively priced mostly for individual users who consume relatively small amounts of cellular data or with a high level of variation, and who routinely travel outside America.

T-Mobile’s Simple Choice Plan is the template on which the Project Fi service was built — including the same 120 countries for certain international features and low-speed but unlimited data outside America.

However, T-Mobile’s Simple Choice Plan starts at $50 for an individual line that includes 1 GB of data, and unlimited use at throttled speeds after 1 GB. For 3 GB and higher plans, T-Mobile rolls over unused data each month, expiring it after 12 months. Oddly, T-Mobile also has a somewhat hidden $30-per-month plan that includes 5 GB of data before throttling, unlimited texting, and 100 minutes of talk time, but it’s available only online or via Walmart (click Simple Choice). (Hat tip to Ars Technica on that one.)

For unlimited talk, text, and 5 GB of monthly usage, however, T-Mobile’s $70 plan matches Google’s ($20 plus 5 GB for $50), with the rollover and unlimited permanent calling being the primary difference. T-Mobile discounts additional lines significantly, and three lines with 5 GB each per month under the above plan is $150 per month ($70 + $50 + $30). Project Fi would be $210 for the same scenario, assuming nearly 5 GB consumed.

When you move into shared data plans, it gets murkier. The Ars article linked just above compares a lot of varying offers from different carriers, including prepaid and postpaid plans.

AT&T doesn’t have the competitive international roaming options, though it includes international texting in its shared plans. With three lines pooling 10 GB of data with smartphones that have already been paid in full, the monthly rate is $145 plus $15 for additional gigabytes above 10 GB.

The Downward Pressure — After T-Mobile announced its data rollover plan in December 2014, AT&T coincidentally offered a more limited version within a month. AT&T rolls over only a single month’s unused data, though for most people, that’s probably good enough. (Verizon’s apparent response to all this is, nyah, nyah, we don’t roll over for anything.)

Google’s Project Fi continues the pressure that T-Mobile started exerting, and that has been transforming the American cellular market for the better. Subsidies are now being broken out more clearly, so, for instance, we don’t pay a monthly fee forever for a phone that we really paid all the cost of months ago.

More importantly, shared data plans, data rollover, and refunds of unused data mean that customers with different needs will start migrating to carriers that have cheaper plans. The downward pressure is already happening, as many of us have seen on our bills. Project Fi may never have millions of customers, but it’s another step towards breaking the logjam of artificial scarcity that has kept cellular costs ludicrously high.

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