by Brad Moon | November 21, 2012 9:34 am
Search engine company Google (NASDAQ:GOOG) is making headlines yet again, but not for anything related to search. In fact, “former search-engine company” might be more appropriate, as the tech giant has been all over the map this year.
While Google still makes most of its revenue in search and display, it now also makes tablets, smartphones, net-books, streaming media devices and glasses while selling movies, music, apps and books. Google’s installing fiber-optic cable in Kansas City and offering wicked fast broadband service to residential customers at a price that’s making Time Warner Cable (NYSE:TWC) and Comcast (NASDAQ:CMCSA) nervous.
Its mapping service has become ubiquitous and competitors like Apple (NASDAQ:AAPL) are bruising themselves as they try to introduce their own versions. Android, its mobile operating system, is the dominant platform for smartphones, accounting for 75% of all such devices shipped in Q3 2012.
See what I mean?
And now, to top it all off, Google is participating in talks with satellite-TV company Dish Network (NASDAQ:DISH). According to The Wall Street Journal, the two are discussing the possibility of partnering on a wireless service.
What would Google gain by becoming a wireless carrier, going up against the likes of Verizon (NYSE:VZ), Sprint (NYSE:S) and AT&T (NYSE:T)?In one word: control.
This is an approach tech dynasty Apple is more-than familiar with. The company has built an empire by creating devices customers can’t easily hack, only allowing apps that pass stringent certification and limiting hardware choices to those manufactured and sold by Apple. This creates control of the user experience, ensuring it is uniform and positive.
Google’s approach has always been a bit looser, but it’s making a concerted effort lately to tighten up the Android mobile experience. It bought Motorola so it would have the ability design and build premium handsets, for example, and is working with third-party vendors like Samsung and LG to create Google-branded Nexus smartphones and tablets that will also showcase the latest Android operating system. Motorola and Nexus devices are intended to appeal to consumers without the interface and upgrading hassles that many Android owners face.
All of this is especially important because mobile is soon going to be the main driver of that all-important advertising revenue. More Android devices out there mean more people using Google’s pre-installed services and more revenue ending up in Google’s pockets — not diverting to Apple, Microsoft (NASDAQ:MSFT), Yahoo (NASDAQ:YHOO), Amazon (NASDAQ:AMZN) or someone else.
Owning the carrier experience would be the next logical step. Think of the bad publicity Apple suffered when AT&T’s network couldn’t keep up with iPhone users’s data usage, for example. Google, with its own service, could ensure that Android-users enjoy a premium mobile connectivity experience over iPhone users — a key area that Apple currently has no real control over.
It would also make for less interference from traditional carriers in the marketing of Google’s products. For example, Google Wallet (yet another “sideline” for the company) is blocked on the top-selling Android smartphone (Samsung’s Galaxy S III) by Verizon because it competes with ISIS – a rival digital wallet standard that Verizon backs.
All in all, controlling the wireless network and Google could ensure Android-users have the best mobile experience possible (further boosting Android adoption), while also ensuring that Google’s mobile products — from wallets to hardware – aren’t messed with by carriers.
Of course, the deal is only in the discussion stages and would still be a long way off if it happens at all. And remember, the company also made a half-hearted and unsuccessful attempt to bid on wireless spectrum back in 2008. Google could be more serious this time around, but only time will tell.
Plus, while Dish Networks has the spectrum available, it lacks the infrastructure. The Wall Street Journal points out that it would be easier for Google to choose a partner that already has that costly infrastructure in place. Then again, Google is sitting on a $45-billion cash pile — and that much cash can make a lot of things happen.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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