Google set to unveil wireless service

GOOGLE is set to unveil its new U.S. wireless service as early as Wednesday, pushing the Internet giant further into telecom and injecting fresh uncertainty into a wireless industry already locked in a price war.

In a key development, the service is expected to allow customers to pay only for the amount of data they actually use each month, people familiar with the matter said—a move that could further push carriers to do away with lucrative “breakage.”

Many traditional wireless plans require subscribers to pay for buckets of data that expire at the end of each month. A 2013 study by a company called Validas, which analyzes consumers’ bills to help them choose the right plan, says smartphone users typically waste $28 each month on unused data.

But the practice is coming under pressure. Upstarts including Republic Wireless and Scratch Wireless have offered usage based models, and even major carriers like T-Mobile US Inc. and AT&T Inc. have allowed subscribers to roll over data.

Google’s service will run on the networks of Sprint Corp. and T-Mobile, which have agreed to carry the traffic, people familiar with the matter have said. The service initially will work only on Google’s latest Nexus 6 phones, and the devices will dynamically be able to switch between Sprint and T-Mobile networks depending on which carrier has the strongest signal.

The service also is expected to use Wi-Fi networks to route phone calls and data, which could further reduce subscribers’ bills.

Other specifics remained unknown. Speaking at a wireless conference in Barcelona last month, Google executive Sundar Pichai said the service was going to be a small scale experiment and wasn’t intended to disrupt the current wireless industry.

At the same time, the technological or pricing features Google adopts could put pressure on the industry’s prevailing model—which is to lock up expensive spectrum then sell lots of expensive wireless Internet service—an approach Google executives have criticized in regulatory filings.

“While Google may not be targeting huge numbers of subscribers, their entry into this market is very important, because it has the potential to disrupt the wireless industry in much the same way Google Fiber prompted changes in the cable and broadband industries,” said Rajeev Chand, head of research at Rutberg & Company, an investment bank focused on the mobile industry.

Google Fiber offers broadband Internet service to homes that is roughly 100 times as fast as the U.S. average. It is only offered in a handful of cities, but it has prompted rival broadband providers such as AT&T and Comcast Corp. to speed up their own Internet services.

Google’s wireless project has been in the works for roughly two years. It is part of a broader effort by the company to make it easier for people to access the Internet. As more consumers and businesses get online, they are more likely to use Google services like search, YouTube and work applications.

“Google argues that if wireless spectrum was used more efficiently it would resolve a lot of the wireless bottlenecks that carriers deal with,” Mr. Chand said.

Usage-based pricing would make wireless data more affordable and therefore more accessible for people, Mr. Chand said.

Google hasn’t built a wireless network, but is able to offer service via agreements to resell service on other networks. Those agreements are good business for carriers. While they bring in less revenue than when a customer signs up directly, they have high margins and low costs. Sprint had more than 10 million wholesale connections at the end of 2014.

Still, Sprint didn’t take the decision to let Google resell its wireless service lightly, according to people familiar with the matter.

The decision went all the way up to Sprint Chairman Masayoshi Son, the people said, and included former Chief Executive Dan Hesse.

Both executives were cautious but ultimately agreed in part because Google agreed to volume limits that would let the sides renegotiate if Google’s service grew too large.