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14 March 2016

Google takes Project Loon to India’s untapped millions

Google is in talks with Indian telcos to bring Project Loon to the country, using its LTE balloons to bring broadband quickly to rural users. Describing the project as infrastructure in the sky, Google’s managing director for India and South East Asia, Rajan Anandan, said that the company was talking to a number of local telcos to handle the provisioning of the service, and that the government was being very supportive. A pilot project is in the works.

India’s population is set to exceed China’s within the next two decades, and after China, it is the fastest growing smartphone market. The country is beginning a massive smart city program that aims to modernize its larger metro areas, and is also bringing electricity and broadband connections to its rural villages. With around 68% of the population (around 880m people) residing in rural areas or below the poverty line, there is a huge untapped market of potential internet users (estimated to exceed one billion by some) and internet traffic, which can only be accessed when they are given affordable internet connectivity, on both a device and service fee basis.

The process of connecting these rural villages with fixed lines would be both costly and time consuming, which explains why Google is apparently finding some traction with the Indian government. Project Loon provides a great way of cost-effectively connecting villages with nothing more than a WiFi router and an LTE dongle in some cases.

Using Loon, India would be able to bring villages online months or years before a fixed line buildout might reach them. In return, Google gets to bring tens of millions, perhaps hundreds of millions, of new users into its web services – monetizing them by advertising to them inside Google’s existing business models, and potentially winning some solid brand credibility if it is perceived as the gateway to modernity for these new internet users.

The terms of the deals between Google and the telcos will be hidden behind NDAs and contractual terms, but each base station is going to require a SIM card, and Google has to bridge its Loon traffic to the outside world through the telco’s networks. Whether Google opts for an LTE-link to its own base station at the end of a fixed line or opts to partner with the telcos to in a co-ownership and co-location agreement remains to be seen.

Importantly, Google has avoided using the word ‘free’ when discussing Loon in India, likely because of the fall-out from Facebook’s Free Basics initiative. Facebook’s route to the emerging internet market in India suffered a pretty serious setback when regulator TRAI banned Free Basics, citing the net neutrality infringements of the sponsored data that would allow users free access to Facebook and its content partners’ websites.

For Google, which has publicly been interested in expanding Loon into India since the end of 2014, can avoid falling foul of the regulator by providing a data pipe for the new internet users – who in turn will boost Google’s advertising revenues simply by increasing the volume of internet traffic accessed through the network.

Put simply, Google doesn’t need to keep people within a walled garden (like Facebook), as the overwhelming majority of current internet users treat Google like the gateway to the wider web. Whether it’s through a dedicated homepage or simply the search bar in a browser, Google stands to gain significantly from just bringing new Indian users online. The habit building that might influence later use over fixed lines is also a major benefit – as Google can capture and retain those users for years.

In addition to providing public WiFi at over a hundred Indian train stations, Google is also bringing its Google Ventures investment fund to India, following the founding of its first Indian Google Capital office last year. Ventures looks at the early-stage funding for startups, while Capital focuses on the later stages. Anandan said that Google wanted to close the gap between the 50+ Series-A investors and the five Series-D investors, to encourage the startups to emerge successfully from the program as fully-fledged businesses.

Elsewhere in the APAC region, Project Loon has been trialled in Sri Lanka, where the government took a 25% stake in a joint venture in return for spectrum allocations for Google to use, and is due to undergo trials in Indonesia later in the year – a particularly challenging market for fixed lines, as it is comprised of around 17,000 islands.

Project Loon was spun out of the Google X Incubator program in 2013, and has been trialled in a number of countries to date. It has yet to secure the global operator deal that would allow it to reach its internet-for-everyone goal in a much shorter time-frame, but Project Loon is certainly ticking along at a reassuring pace. While it may never become a concrete figure in the quarterly results that Google can point out to shareholders, the project’s wider impact on influencing early-adopter consumer behaviour is not to be sniffed at. This could win Google the next 2.5bn unconnected internet users before any other web platforms get a sniff in.

At last month’s Mobile World Congress, Google VP Mike Cassidy said that the commercial deployment of Loon was getting close, with the balloons having travelled some twenty million kilometres in the stratospheric winds that Google uses to position the balloons – adjusting their altitude to ride winds that will take them in the required direction. To date, Vodafone and Telefonica are the largest MNOs to test their compatibility with Loon