Last Updated Dec 14, 2009 6:21 AM EST
Rather than selling the Nexus One phone through a wireless carrier -- as the bulk of phones are sold in the U.S. today -- Google plans to sell the Nexus One itself online, people familiar with the matter said, although the company may seek wireless partnerships in the future. Users would have to buy their wireless service separately. The phone's pricing, along which countries Google initially will target for the device, couldn't be learned.But in this case, it doesn't matter what the phone's price will be, nor in what countries it will first appear. (Though I don't see how round one could exclude the U.S.) What is important is that Google is driving the sales directly and taking the unusual route of selling to the carriers, which, in turn, would then offer the phone to customers either for free or at highly discounted rates. And that's taking the existing mobile telecom business model and turning it on its head.
The irony is that Apple, which is in Google's target sites, made it possible with the high price of the iPhone. Consumers proved that they'd be willing to drop hundreds on a handset, even buying it direct from a company, so long as they were getting enough perceived value in return. Google simply took the next step, trying to snap the link between the purchase of hardware and service contract. That has some major repercussions:
- Google is now the operating system vendor that is willing to commission its own hardware and forgo the traditional route to market. It's the equivalent of Microsoft (MSFT) taking orders for a copy of Windows and then offering customers a menu of potential hardware providers. Only in this case, Google also offers the hardware.
- This could finish the balance-of-power shift that Apple started. The telecoms will have to compete to get the attention of the handset vendor -- if and only if the handset vendor can create enough interest in its products that carriers can't afford to be left out in the cold.
- This move could also lead to the end of the locked device (unless Google ships specific versions to keep consumers chained to a given carrier). It at least increases pressure for hardware vendors to leave handsets unlocked, which ends the traditional hold that carriers had on customers. Someone could just up and take that expensive handset to another carrier.
- With the end of carrier hardware subsidies comes an end to the rationale for charging termination fees, a practice that Congress has already started to put under the microscope, because there is no longer an investment that the carrier can claim. Say goodbye to the other hold that carriers had on consumers.
According to Peter Kafka at All Things Digital, T-Mobile has already lined up to do business. It will be interesting to see how long it is before others do, as well. And if Google markets an unlocked device -- possibly subsidized by advertising sales -- then other carriers might not even have a choice.
Image via stock.xchng user babakazad, site standard license.