Google could make Iliad’s US adventure credible


French operator Iliad may have had its $15bn bid for T-Mobile USA rejected and branded “preposterous”, but it is unlikely to give up too easily in its attempt to bring its disruptive practices, which have already created commercial havoc in France, to the US. In recent weeks, the rumor mill has suggested it might enlist support from Google or Microsoft to enhance its offer – which would clearly show its hand as a carrier which will brandish WiFi as its primary weapon to disrupt the market.

In France, Iliad’s Free Mobile unit has managed to undercut the incumbents’ pricing dramatically by running most of its traffic over its extensive network of WiFi hotspots and homespots, thus reducing its cost of delivery and its need for cellular capacity (which costs, whether built out itself or obtained via its MVNO deal with Orange). In the US, it does not have that WiFi infrastructure in place, though TMo has always been the most WiFi-friendly of the major MNOs – but it would still have to deploy unlicensed technology aggressively to turn TMo from a plucky challenger (but one which mainly threatens former suitor Sprint, not the big two), to a genuine disruptor.

That points to a WiFi-oriented partnership, whether that is part of the bid itself or comes later. Faultline, has already painted a scenario where Iliad would achieve this via an alliance with one or more cablecos, tying its fortunes to the huge CableWiFi build-out, and its potential to support WiFi-first and WiFi-only models that reduce the importance of cellular networks and spectrum (and so sideline the cellcos in the wireless power play). Similar logic could lie behind an alliance with Google, which has far less directly owned WiFi infrastructure than Comcast et al, but has many influential partnerships as well as the ‘business homespot’ network it is creating with Ruckus.

Google seems a more likely partner than Microsoft, which may still be feeling the pain of its attempts to buy wireless operators at the turn of the century, and whose new CEO Satya Nadella seems more interested in the cloud than the access network as a source of power. Google, however, would dearly love to see the kind of shake-up, which has broken the cosy status quo of French telecoms, being applied to the US.

Despite its reliance on cellcos to distribute and support the Android devices which propagate its services and adverts, in Google’s dream world, the licensed carriers would be far less significant in its ecosystem. Instead, wireless connectivity would rely mainly on open technologies, notably WiFi, where the search giant has direct power, and which encourage the proliferation of new business models and innovations, to spread Android and Google services far and wide.

To this end, Google has repeatedly lobbied for more license-exempt spectrum in the US; for open access in licensed bands; and for new spectrum such as the TV white spaces. And it has built WiFi networks, including metro services and the business homespot initiative, and of course has significant investment in fiber, whether dark or commercial. That asset alone would be valuable to Iliad, helping to replicate the kind of supporting infrastructure it has in France, which enabled a newcomer to the mobile market still to achieve strong economics. In the US, with Google, it would have city fiber to sit alongside TMo’s spectrum and LTE, and while in France its challenge was to fill in the cellular hole (still necessary to provide universal coverage), in the US it would be to secure the WiFi, by alliances or build-out.

The benefits to Iliad are clear, assuming financial terms could be reached, and for Google, there would be significant advantage in turning a conventional cellco into a mechanism for furthering its open access goals. There would be many dilemmas too. Would Google be an active co-owner of an operator and how would that affect relations with cellcos and cablecos? The search giant has often been rumored to be interested in running its own networks, but its real interests lie in ensuring that as many networks as possible spread its services to every user. It could follow the Amazon approach of delivering an optimized experience on certain devices, with embedded connectivity, but it hardly needs its own network for that. And previous experiences of investing in carriers such as Clearwire have returned little result for Google – indeed, the Clearwire episode may provide salutary warnings of how hard it is for a disruptive player to escape being dragged into the clutches of the conventional cellular model, with all its embedded power.

The New York Post reported last week that Iliad had asked Google and Microsoft to help it make a second bid for TMo. Other companies which could join Iliad in an offer, or come up with rival bids, include Dish Network, which badly needs more spectrum and a network partner to make its LTE-Advanced plans viable; or one of the cablecos, to turn their WiFi/broadband combinations into full quad plays. Charter and Cox have both been rumored as suitors, though Cox denied interest this week.

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Caroline has been analyzing and reporting in the hi-tech industries since 1986 and has a huge wealth of experience of technology trends and how they impact on business models. She started her career as a journalist, specializing in enterprise and carrier networks and in silicon technologies. She spent much of her journalistic career at VNU Business Publishing, then Europe’s largest producer of technology publications and information services . She was publishing director for the launch of VNU’s pan-European online content services, and then European editorial director. She then made the move from publishing into technology market analysis and consulting, and in 2002 co-founded Rethink Technology Research with Peter White. Rethink specializes in trends and business models for wireless, converged and quad play operators round the world and the technologies that support them. Caroline’s role is to head up the wireless side of the business, leading the creation of research, newsletters and consulting services focused on mobile platforms and operator models. In this role, she has become a highly recognized authority on 4G systems such as LTE and WiMAX, and a prolific speaker at industry events. Consulting and research clients come from major mobile operators, the wireless supply chain and financial institutions.