Posts Tagged ‘Google Phone’

There has been a lot of uproar this week about Google’s NexusOne mobile phone.

photo courtesy BoyGeniusReport via Gizmodo

(photo: BoyGeniusReport)

Here’s my take on it:

Google is a big believer in, and supporter of, an open access Internet. Google is also a big believer in indirection of costs away from the consumer, making its services appear to be free. These two factors are at the heart of Nexus One – it’s not about any remarkable property of the phone itself (we’ve seen a slew of Android devices already), but rather the way in which the device will be delivered and serviced.

With Nexus One, Google will offer a mobile service package that eliminates the control point (and burdensome expense) of the mobile carriers, by unbundling device and service. I believe Google will sell the Nexus One via its own online shop, delivered ready-to-roll with Google’s applications, for a ground-breaking price (for example, $99). Google can afford to make these devices inexpensive to consumers (that is, not much uplift over the cost of parts, assembly and delivery) because it is using open source software components and because it has a completely different mechanism for extracting value – advertising and other pay-for-placement services.

Having removed the device from the costly packages traditionally offered by carriers – packages which create the illusion of low phone prices by dividing the actual cost of the device over 24 months of service – Google will extract high-volume, low-priced wireless network access deals from a selection of carriers (for example, $29.99/month for unlimited calling and data). Google will sweeten this package for the carriers by taking over not only retailing, but the customer service load for delivery and help-desk. It’s possible that Google will even purchase bandwidth in-bulk from the wireless carriers such that users see no contract with a specific carrier – only a monthly contract with Google.

Along with the device will come your very own Google Voice account and number. You’ll be able to link that number to your home and business phones, of course – call routing is a central feature of Google Voice – and the purchase of both device and service from Google means your actual wireless number is probably unimportant and hidden.

The combination of an inexpensive device (the profit is made indirectly via the advertising delivery) and inexpensive service (via bulk purchase of carrier bandwidth and a sharing by Google of phone delivery expense) will force a major change in the way all mobile phones are delivered and their price point. Consumers will no longer tolerate long contracts for service and, given the alternatives, the high prices manufacturers charge for their devices. Who reading this honestly believes that Apple’s iPhone would be the runaway hit it has become if the actual cost of the device – rumored to be $699 – was borne by the consumer?

But I don’t think it ends there.

With its purchase of Gizmo5, Google is now a full-service VoIP provider – it can offer both stationary and mobile calling services with full routing to/from the traditional Public Switched Telephone Networks. Google Voice works over WiFi networks just as it does over telephone networks, of course. Remember Google’s free WiFi access for travelers over the recent holiday? Well, Google owns its own high-bandwidth fiber network interconnecting its worldwide data centers – was it experimenting with its ability to handle and route high volumes of wifi-originated traffic over its own networks? Imagine a scenario where Google partners with many wifi hotspot providers, couples that with its own international network, and begins offering unlimited access to that capability along with your calling package. With Google in control of routing and switching, the cost of delivering local, in-country and international calls can be brought to tremendously low price points. Note that this is the way we see the desktop Internet today – we pay a flat fee for access to a locally-supplied high-bandwidth line, and with it, we get access to content worldwide.

To summarize, I believe the GooglePhone is the most visible step thus far in Google’s attempt to make the mobile Internet as inexpensive and barrier-free as the Internet itself. I think we’ll see Google position this new phone as independent of its work with the traditional phone manufacturers and carriers so as not to alienate them. That will assure Android continues growing its presence in the market, which is necessary to drive application development on the platform – a factor Apple has shown to be important in market success.

It’s a gutsy model. But Google has watched Apple’s closed/proprietary model rule the day for the last two years and – if its past actions are an indication – realized it needed to use its considerable clout to move the mobile Internet back in a more open direction. We’ll all benefit if they’re successful.