Latest news reported that Google is negotiation an agreement with Hutchison Whampoa permitting to the US company to launch a mobile service worldwide charging the same for calls, texts and mobile data regardless of the customer’s location. This seems to be a disruptive entry of the OTT industry into the exhausting discussions about the abolition of roaming surcharges. More recently, Google announced a wider mobile strategy named Project Fi, aiming at providing mobile at a connectivity in more than 100 countries int he world. Commissioner Oettinger, some one who cannot be seen a Google’s friend, welcomed the initiative claiming that the move of Google may be seen as an incentive to close rapidly the discussion about the end of roaming.

One could wonder what could be the real aim of Google in this area. By getting wholesale access from Hutchison (or from any other mobile operator), Google may become an MVNO (mobile virtual operator) and start to operate like Virgin Mobile in UK, Postemobile in Italy, Numericable in France, Telenet in Belgium ecc. However, this scenario seems not realistic per se, because of a few simple reasons:

– the MVNO business is regulated exactly as a telecom business, and I wonder whether Google may be really willing to become part of this complex regulatory environment. Better to remain in the OTT world instead;

– profitability and margins in the mobile sector are decreasing in general. A MVNO must be very efficient to get a positive result because – in the absence of mobile access regulation – the cost of the wholesale mobile agreement is unilaterally decided by the mobile telco (Hutchison in the Google’s case) providing access;

– the roaming business is going to decline in any case, in the EU and abroad, because of a regulatory and economic trend worldwide, although at different speeds (you can still make some good money in some part of the world, but how long?). Therefore, today in 2015 it is too late to enter this market. Roaming tariffs still exists just to separate national markets and avoid cross-border competition, while the absolute margins are becoming negligible for the overall business of a mobile operator. MVNO can make still an interesting business if they are efficient, however such margins are likely much lower than margins of online  advertising.

Thus, Google’s objective in this area may be somewhere else. More likely, the move of Mountain View can be seen as the irresistible rise of OTT services over connectivity, with the latter becoming a simple commodity with a value destined to decrease over time.

In fact, operating as an MVNO (and thus becoming a regulated player) could make sense only if the envisaged business is more sophisticated than providing mobile connectivity. Google could think to bundle its platform and services with connectivity in various forms, in order to reflect the market trend whereby search and video are migrating from fixed to mobile. This strategy could be reinforced by Zero-rating tariffs: in other words, Google mobile users would have a preferential price to access service supplied or simply hosted by Google. Net neutrality supporters wouldn’t like, however.

This overall business strategy may however rise antitrust concerns due to the dominance position of Google in some markets.

A way for Google to avoid telecom regulation, and maybe to minimize antitrust concerns, would be to operate as mere airtime reseller, i.e. offering to users a package of mobile data connectivity everywhere and getting a commission fee from the mobile operator. Since the connectivity service would still be formally provided by the mobile operator selling the airtime, Google would not become an MVNO, and it would escape telecom regulation. That kind of business may be combined with the commercialization of Free-sim mobile devices, as Apple is also considering to do it.