Contrary to reports, Google didn't become a mobile carrier with the introduction of Google Fi. Google Fi was launched to prove that a network-of-networks serves smartphone users better than a single mobile carrier's network. Patents related to Google Fi, filed in early 2007, explain Google's vision – smartphones negotiate for and connect to the fastest network available. The patent and Google Fi share a common notion that the smartphone should connect to the fastest network available, not a single carrier's network that may not provide the best performance. It breaks the exclusive relationship between a smartphone and a single carrier.
The contract carrier lock-in leaves users dependent upon a single carrier's coverage limitations. Wireless service providers offering service only to their customers is analogous to power utilities offering customers different electric outlets.
Patent fillings from 2007 (note the Priority Date, March 19, 2007) describe a network that operates like Google Fi:
"devices, systems, and methods for providing telecommunication access and applications to users in a flexible manner. Devices may operate on multiple networks, and may in certain circumstances seek out bids from telecommunication service providers. For example, a device such as a mobile telephone may have the capability to operate over multiple different networks, including a home network when in the home, to transition to a metropolitan network when outside the home but in a higher-density area (urban/suburban), and transition to a more traditional cellular network when outside such a higher density area. The connections may, in appropriate circumstances, be provided by different telecommunications providers, and may involve hand-offs of a particular communication session from one provider to another."
Google wants more consumers to have access to faster, lower-cost mobile and terrestrial internet because the company's products monetize better as speeds increase. Project Fi offers an affordable mobile service over a network-of-networks created by combining Sprint and T-Mobile's networks with a network of more than a million Wi-Fi hotspots. Google Fi costs are competitive, priced more than Boost Mobile but less expensive than market leaders AT&T and Verizon.
Achieving the market's lowest price isn't Google's goal; proving the efficiency of a network-of-networks is. According to Google, Android smartphones will seamlessly switch both between carrier networks and from carrier networks to Wi-Fi in search of the strongest signal on the fastest and lowest-cost network. Switching will work without interruption even for phone calls. If Google proves a network-of-networks delivers a better mobile experience at a lower cost, perhaps it can enlist more mobile carriers to join its network-of-networks, ultimately improving coverage and capacity. Verizon and AT&T might not join, but there are about a hundred smaller mobile carriers in the U.S. that might.
Switching from 3G and 4G networks to Wi-Fi where available significantly improves network efficiency. Ruckus Wireless and Devicescape proved that offloading the 3G and 4G networks to Wi-Fi works by building curated virtual networks from tens of millions of Wi-Fi hotspots and reselling access to the networks to carriers. Republic Wireless's use of Devicescape's Wi-Fi network is a reasonable benchmark for predicting the cost effectiveness of Google Fi when it reaches full scale. Republic Wireless is able to deliver unlimited calls and 4G data for $40 per month. A Wi-Fi-only plan with unlimited calling and data is just $5 per month.
One part of Google's patent that wasn't discussed during the announcement was micro-auctions, in which users pay for network usage by the sip. Google's patent describes a mobile device that submits a proposal for competitive bids by network operators each time the network is used. An app in need of a network connection would send a request for a bid to nearby networks and would accept the lowest bid with the matching network service level.
Micro-auctions would provide consumers the best user experience because they would always connect to the fastest network available. Large mobile carriers would resist this change because they would forego subscriber contract revenues earned independently of network quality for revenues earned by bidding the lowest price to deliver the fastest network performance.
Google convinced the third and fourth largest mobile carriers in the U.S., Sprint and T-Mobile, to become partners in Google Fi, indicating that at least some carriers agree that this model is a promising business venture. If Google can prove its case to consumers and increase coverage and capacity by enlisting more mobile carriers, Google could outflank Verizon and AT&T with a larger, faster, and more reliable network.