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Google unveils wireless service, but prices don't impress

Aaron Pressman
A logo is pictured at Google's European Engineering Center in Zurich April16, 2015. REUTERS/Arnd Wiegmann

Google (GOOGL) finally unveiled its much-anticipated wireless phone service, dubbed Fi, but pricing wasn't as low as some consumers might have hoped.

The service will cost $20 per month for unlimited talk and texting plus $10 per gigabyte of data used. That's slightly less than the standard monthly pricing at T-Mobile (TMUS) or Sprint (S), but in line with discount plans offered by Walmart (WMT) and others. And the carriers offer cheaper plans for big data hogs than Fi does.

For instance, T-Mobile charges $70 for 5 GB of data, which would be the same as Fi, but $80 for a truly unlimited plan. So if you use 7 GB or more regularly, T-Mobile is cheaper.

But the twist with Fi is that Google will only charge customers for the data they use each month, no matter which plan they had selected in advance. (There are no annual contracts.) For example, a customer paying $30 for 3 GB who used only 1.4 GB would get a refund of $16 for that month, Google said. No U.S. carriers offer such rebates, although several -- including AT&T and T-Mobile -- allow customers to roll unused amounts of data to future months.

Google didn't say how many customers it would accept during an "early access" period, offering only a "request invite" button on its web site. "We're sending a small number of invites each week, so hang tight," Google said in an email responding to people who signed up. "If you don't receive an invite soon, you'll get an update from us within a month."

One big caveat of the new service: subscribers can only use Fi with a Google Nexus 6 phone, available starting at $649 or $27 a month for 24 months. No other phones, including popular models from Apple (AAPL) or Samsung, will be compatible with Fi at the start. The Motorola-made Nexus 6, with a 6" screen, is larger than most smartphones and not as well-regarded by reviewers as the iPhone or Galaxy S 6.

As expected, Google is buying the actual wireless service for its customers from T-Mobile and Sprint. That avoids the massive expense of buying airwave licenses and building a national network from scratch, but also leaves Google at the mercy of the carriers if they decide to raise prices or impose customer limits.

The Fi service will also work over Wi-Fi links if cellular coverage isn't available.

The offering is the latest move by Google to encourage people to get online more easily and at a lower cost, in line with efforts like its home broadband Internet service, Google Fiber. For T-Mobile and Sprint, the deal provides additional traffic on their networks without much risk.

T-Mobile CEO John Legere said he expected his company would capture the largest share of traffic from Fi customers. And he praised Google for helping shake up the wireless market. "The carriers have dug in their heels and held US wireless back for too long," Legere wrote in a blog post on Wednesday. "This industry needs all the fresh blood and fresh thinking it can get."

The Fi service also includes inexpensive international features, including unlimited international texting. In 120 major countries, including India, Japan and Germany, data will also cost $10 per GB, the same as in the U.S.

Google's plans are cheaper than the regular choices available from the two largest carriers, AT&T (T) and Verizon (VZ). Both of those carriers have broader network coverage across the entire country than T-Mobile or Sprint, however.

Shares of Google were up 1.3% after the Fi service announcement. AT&T was up 0.1% and Verizon gained 0.7%. T-Mobile shares were up 2.1% and Sprint gained 1.7%.


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