Watch CBSN Live

Google's wireless play is all about the data

Google (GOOG) has confirmed that it will offer a wireless service of its own. Sundar Pichai, senior vice president of products for Google, told the Mobile World Congress on Tuesday the company is in talks with carriers and will make a detailed announcement "in the coming months," although it's unclear when it would begin offering a service.

Pichai downplayed the potential market impact: "We don't intend to be an operator at scale. Our goal is to drive a set of innovations we think should arrive, but do it a smaller scale, like Nexus devices, so people will see what we're doing."

That's all well and good, but it takes an aggressive naiveté to assume that Google is only trying to showcase capabilities. Far more is going on in the expansion into communications infrastructure.

Google raised some eyebrows when rumors first broke in January that it planned to offer wireless service. Given the advancements that such carriers as AT&T (T), Verizon (VZ) and Sprint (S) have made, in addition to some aggressive investments in expanding infrastructure, the situation in wireless isn't the same as in handsets.

Google may have created the Nexus Android phone as a way to push hardware partners into offering more advanced designs to compete with Apple's (AAPL) iPhone. But even that explanation seems questionable, given that the company bought and then sold Motorola Mobility. Google was clearly interested in establishing a serious beachhead in hardware but, for a variety of reasons, failed.

Wireless isn't Google's first expressed interest in an infrastructure business. It has a growing gigabit fiber-optic Internet connectivity business and recently announced expansion to four additional metropolitan areas. The company is also looking at five other new areas. That speaks to a serious intent to get into the telecom carrier business.

What wired and wireless access have in common that would be of great interest to Google is data. Information on the detailed online activities of consumers is highly valuable to Google, which makes its major income from advertising. The more details it has, the better it can target ads and the more it can charge for them, potentially reversing the downward pressure on ad prices it has experienced.

Working with existing wireless carriers and becoming what's called a mobile virtual network operator would be unlikely to add major revenue directly to the company's coffers. MVNOs have not historically been raging financial successes.

But Google could experiment and learn to operate its own network, so long as it didn't lose a lot. In that case, the data it would accumulate would be more than enough of a reason to get deeply into the business.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.