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Could Google's Project Fi be cable's answer to wireless?

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Google’s Project Fi wireless service has the potential to turn the mobile industry on its head. But not in the way you might expect.

Last week, Google announced that it is working with carriers Sprint and T-Mobile to offer a wireless service that will seamlessly switch between Wi-Fi hotspots and 4G LTE cellular networks. It’s calling the service Project Fi.

Project Fi on its own isn’t likely to threaten the dominance of Verizon and AT&T, by far the two largest carriers in the nation, but it’s potentially a big deal to the cable companies. Google could use its technology and clout to push for a more seamless transition between Wi-Fi and cellular — something that hasn’t worked so well in the past. That could pave the way for cable providers to make another bid into the wireless business by wedding cellular service with their own network of Wi-Fi hotspots.

“Google will be an accelerant in a market that the cable companies have already shown interest in,” said Spencer Kurn, analyst at New Street Research. “It will help cable companies figure out how to improve the quality of the Wi-Fi service so that it can compete with wireless.”

At least one person believes there’s a logical convergence of cable and wireless: T-Mobile CEO John Legere. He said on his company’s earnings conference call this week that it makes sense for wireless and cable companies to merge. Cable tiptoeing back into wireless through a Wi-Fi-based service may be a first step to an eventual deal.

For consumers, that could ultimately lead to more options in the wireless business, pitting cable against AT&T and Verizon in the wireless business. The two sides already compete for consumers in the landline phone, broadband and pay TV businesses.

How Project Fi works

The basis of Project Fi is Google’s use of more than a million Wi-Fi hotspots that it will use as the foundation of its network. The beauty of Wi-Fi is that it uses unlicensed spectrum, so setting up Wi-Fi hotspots is cheap. It’s cheap enough that hotspots have sprouted up in locations ranging from your home to coffee shops and airports. 
But Wi-Fi transmits signals over only short distances, making it too costly to build a network that offers coverage everywhere the way a cellular service, which uses licensed wireless spectrum, can.

To fill in the gaps of coverage, Google has inked deals with Sprint and T-Mobile to use their cellular networks when Wi-Fi isn’t available or a signal is too weak. This is similar to other services from companies like Republic Wireless, Scratch Wireless and FreedomPop. They were among the first companies to build mobile businesses that use free Wi-Fi networks first and then fall over to cellular service as a backup when Wi-Fi is not available.

A key aspect of the Project Fi service is its use of technology that allows it to connect to determine which network offers the best connection. This means it will seek out the best-performing network, whether that’s Wi-Fi or T-Mobile’s or Sprint’s 4G LTE and voice networks. And then it will seamlessly switch among these networks if the connection weakens. For instance, if you start a phone call or data session in a Wi-Fi hotspot at home and then get in your car and drive down the street, the call will stay connected even as your phone reconnects to a cellular service once it is out of range of the Wi-Fi connection.

Keeping costs low is the key to competing in this market against AT&T and Verizon. Because customers using a Wi-Fi-first service are on Wi-Fi networks about 95 percent of the time, according to Republic Wireless, the fees the operators must pay wireless operators, like Sprint and T-Mobile, for the use of their networks, are minimal. This allows Republic Wireless to offer a service starting for as little as $10 a month.

Google’s service is priced a little higher than some of these other services. Google is charging $20 a month for unlimited voice, text and international coverage in more than 120 countries. It also charges $10 more a month for each gigabyte of data a customer uses. Data usage on Wi-Fi is free. If a customer doesn’t use all the gigabytes he or she subscribed to, Google will offer a credit for any unused cellular data.

Though the service is priced far lower than typical cellular service, Google doesn’t want to topple the carriers. Instead, it hopes to nudge the industry into thinking about different ways of offering wireless service.

“We don’t intend to be a network operator at scale,” Sundar Pichai, senior vice president of products for Google, said in a keynote address at the Mobile World Congress trade show in March, where he first confirmed Google’s plans to launch a wireless service. “Our goal is to drive a set of innovations we think should arrive, but do it at a smaller scale, like Nexus devices, so people will see what we’re doing.”

Cable’s mobile ambitions

This technology could be a key driver in helping new entrants, like the cable companies, enter the wireless market. Since Wi-Fi will cover only a portion of a network, upstarts in the market will likely have to lease network capacity from established wireless players. A technology that can, on the fly, determine which connection will perform best lets operators strike deals with multiple wireless operators to get the best performance available when customers are not in an area with Wi-Fi.

This means cable companies could offer their subscribers faster and more-reliable connections when customers roam off Wi-Fi. It also might let the cable companies further reduce costs by forcing the carriers it leases capacity from to compete with each other.

“The cable industry already has an extensive Wi-Fi network, and they have a substantial amount of fixed assets in the ground that can be easily tapped in a way that current wireless can’t,” Kurn said. “If they can offload 80 to 90 percent of their traffic to their Wi-Fi networks, and provide cellular access to fill in the gaps, their costs to offer service would be a fraction of what it is for the big carriers.”

For years, the nation’s largest cable companies, Comcast, Time Warner Cable, Cablevision, Cox and Bright House Networks, have been building out public Wi-Fi networks in their territories. The service has mainly been used as perk for home broadband customers, providing free Wi-Fi access to subscribers when they aren’t at home. To extend the footprint of their individual networks, the companies, which all operate in different regions, created CableWiFi, which connects their disparate Wi-Fi networks to offer cable subscribers access to more than 200,000 indoor and outdoor hotspots throughout the country.

Comcast has also launched a new service that partitions home Wi-Fi routers so these devices also broadcast a public Wi-Fi signal. This has expanded its Wi-Fi footprint even further.

It’s no secret that cable companies have wanted a piece of the mobile market for a long time. In 2005, a group of cable companies partnered with Sprint on a joint venture called Pivot, which allowed each cable provider to sell its own branded wireless service through Sprint’s network. Some of them bought their own spectrum in 2006 and 2008 but eventually sold it to Verizon in 2011.

Cablevision has been the only cable company to test the waters with its own limited wireless service. Earlier this year, it launched a Wi-Fi calling service called Freewheel. But the service works only on Wi-Fi and doesn’t offer a cellular backup option to improve network coverage.

So far big cable companies are keeping quiet about their plans to move into the wireless market. But executives are likely watching Google and Project Fi closely.

“Google is doing some interesting things,” said a cable executive who didn’t want to be named. “It could be a beacon in the wilderness that paves the way for anyone looking to compete against AT&T and Verizon.”

A shaky handoff

All of this sounds great, but a Wi-Fi-first system has one catch: there’s no guarantee the service will work well on Wi-Fi, or when you’re moving between Wi-Fi and cellular networks. This may be fine if you’re downloading email to your smartphone, but it’s unacceptable when it comes to making voice calls or streaming video.

Some work has been done by Republic Wireless, Scratch Wireless and T-Mobile to improve the quality of those calls and the handoff between different networks. Wi-Fi standards groups have also tried to help alleviate some of these problems with standards to define network handoffs as well as other technical issues.

But more work is needed to make a Wi-Fi-first service work as seamlessly and effortlessly as a cellular network run by an individual carrier. In order to make it work today, Republic and Scratch have had to work closely with handset makers to adapt devices to be able to make these transitions.

This is a time-consuming and expensive process that severely limits the devices that these services can offer customers. Are you a Republic Wireless customer who also wants to use an iPhone? You’re out of luck.

This is where Google’s Project Fi can play a significant role in the development of the technology, said Jon Finegold, vice president of marketing at Scratch Wireless.

“Google controls the operating system,” he said. “And it has influence throughout the entire ecosystem. We’ve tried to make it easier to get onto Wi-Fi networks and to switch between Wi-Fi and cellular networks, but Google will be able to do so way faster than we ever could on our own.”

Indeed, Google’s control of Android, the most widely used mobile operating system in the world, could help improve the Wi-Fi first service by baking new technology innovations directly in to the software. And because of its role in the device ecosystem, Google could influence chipmakers and even network equipment makers to include technologies that make using Wi-Fi and cellular more seamless.

“We’d never have that kind of influence over the market in terms of getting technology into devices and network equipment,” Finegold added.


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