By Ryan Knutson
RALEIGH N.C.--Of all the eyes on Google Inc.'s new wireless
service last week, none were watching more intently than those at
the North Carolina headquarters of Republic Wireless--a startup
that is about to face a big new rival.
Google's new service, called Project Fi, takes the potentially
disruptive approach of routing users over free Wi-Fi airwaves where
possible and using expensive cellular service only as a fallback.
That's exactly what Republic has done as it has built up a service
with a few hundred thousand subscribers over the past four
years.
It isn't clear what the entrance of a big consumer brand like
Google means for Republic. Optimists say it validates the
Wi-Fi-first approach and may help Republic persuade subscribers to
switch from mainstream carriers while expanding the number of
phones that will work on the service. But there's also a risk that
Google could end up disrupting the 225-person company that moved
more quickly to challenge the telecom industry's predominant
pricing.
Google and Republic have a relationship that dates back years,
and at one point employees at Google's former Motorola unit
brainstormed about acquiring Republic. Now, though, Google has
jumped into Republic's space. In a sign of the fresh competition,
Republic rolled out a plan last week to charge subscribers only for
the data they use, and Google's service was unveiled with an
identical concept just two days later.
"It's like having a famous person move next door," said
Republic's co-founder, David Morken. "You want to give them a warm
welcome and hope they know how to be a good neighbor."
Google declined to comment.
A few other companies also offer a Wi-Fi first approach,
including the startups Scratch Wireless and FreedomPop. Cable
companies have also been exploring the Wi-Fi-first idea, and
Cablevision has launched a Wi-Fi-only service.
Republic Wireless is a unit of Bandwidth.com, a company that Mr.
Morken founded in 1999 to resell Internet access to small
businesses. In 2001, Republic relocated to North Carolina and built
a network to route calls over the Internet that is now used by
Skype and Vonage. In 2006, it began working with Google to help its
Gmail voice service, now known as Google Voice, make calls to
regular phones.
The wireless venture came about after Mr. Morken promised his
oldest child an iPhone if he got straight A's. He then extended the
promise to the rest of his children. By the time the fourth oldest
won a phone, Mr. Morken's AT&T bill had topped $1,000 a
month.
Mr. Morken wondered if he could use Bandwidth.com's Internet
phone technology to offer cheaper wireless service by leaning on
the Wi-Fi hotspots that many people already have at home, at work
and at sites like airports. Republic began selling its service in
2011 with just 6,000 test phones. In the first 24 hours, about
100,000 people tried to sign up.
A key challenge was to figure out how to keep calls from
dropping when users moved out of a hotspot. Republic found an
answer in 2013: When the Wi-Fi signal gets weak, the device begins
a second call over the cellular network and then merges the calls.
The company has more than a dozen patents related to the
capability, which is known as seamless handover.
Republic sells service with cellular-voice-and-text fallback
starting at $10 a month. The base plan for Google's new offering
costs $30. Republic has around 300,000 subscribers.
The handover feature on Google's Project Fi works similarly.
Wi-Fi-calling features available from Scratch Wireless, T-Mobile
and Sprint don't yet have the same seamless-handover function.
Jonathan Chaplin, a telecom analyst at New Street Research, said
Google's entry will help Republic because it validates the
Wi-Fi-first concept. Google's size may also encourage more phone
makers to support the technology on their devices, thus broadening
the number of phones Republic can sell.
Right now, customers can use Republic on phones made by
Motorola, which has worked closely with Republic to make the
service work. After Google bought the phone maker in 2012, Motorola
employees were given a challenge: Figure out how to sell one
billion phones.
Motorola employees discussed internally whether acquiring
Republic might help achieve that goal, according to a former
employee involved in the discussions. The thinking was that if
Motorola could sell phones with Republic's inexpensive wireless
service, they would be more attractive.
Google declined to comment on the discussions. The idea was
dropped after Google sold Motorola to Lenovo Group Ltd. in
2014.
Mr. Morken is an avid cyclist who has completed two 100 mile
ultramarathons, but he also believes in time off. A few days a
week, he circles the office and encourages employees to go home.
When workers go on vacation, they are barred from communicating
with anyone about work.
In 2012, Mr. Morken was about to leave on a two-week trip to
Wyoming with his family when he learned that Republic's warehouse
owner in Texas was going bankrupt with Republic's phones locked up
inside. He got the ball rolling on a solution, then left for his
vacation anyway. Mr. Morken said that going away turns younger
staffers into leaders by forcing them to make tough decisions.
"I had no idea whether when I got back whether we'd still have a
Republic Wireless," he said.
Alistair Barr contributed to this article.
Write to Ryan Knutson at ryan.knutson@wsj.com
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P5089
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P7069
Access Investor Kit for Motorola Solutions, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US6200763075
Subscribe to WSJ: http://online.wsj.com?mod=djnwires