Nexus One, the first phone to be sold by Google through its own web store for mobile phones. This is arguably the best Android phone to date. Yet, fans of Android phones are disappointed.
Almost all of Nexus One's features and specs were known before yesterday's official launch by Google. This is hardly surprising, because Google had distributed thousands of these phones to its employees worldwide and to a select group of non-employees (including some bloggers) in December 2009.
As nice as the Nexus One seems to be, it represents only an incremental upgrade to both the Android OS and the phone hardware. Going purely by the handset specs, there is no reason for Google to sell this phone as its own. So, people expected that Google might offer some wow-inducing service with the phone. Alas, that was not to be.
When Google made big announcements in the past, it was to capture the imagination of the people and turn them into loyal users of its services. This time, Google has a more subtle agenda. Google has entered the phone selling business to break the nexus between mobile handset makers and the cellular service providers in the US.
Compared to many other countries in the world, the US has a small number of very big cellular service providers. Each of these carriers provide service over a different wireless band. As a result, most cell phones in the US work with just one carrier, rarely two. Almost all cell phones in the US are sold via carriers, bundled with their service packages. The carriers entice the customers by offering a rebate on the phone if they sign up for a contract. This power that the carriers have over which handsets will be sold to their customers, gives them extreme leverage over handset makers. For example, if a handset maker wants to sell a large number of phones to the customers of Verizon Wireless, he better not include any features in the phone that would displease Verizon. For years, the US carriers have used this leverage to artificially hold back any big advances in cell phone features. Why let handset makers sell feature-rich phones, when the carrier could milk customers for dollars by providing the same feature? Or, why spend too much money in upgrading their networks if customers get handsets with VoIP or video features?
Google realized that if it wants mobile phone users to freely access the Internet, Google's own services, and most importantly, the ads it serves, then it should break the strong say that carriers have in dictating phone features to handset manufacturers. Hence, it has setup a web store where people can directly buy feature-rich phones, instead of buying them through carriers. Google's ultimate aim is to offer a range of very attractive phones that are bought by people for their great features, and not for the carrier's network or the rebate the carrier offers. The choice of a carrier becomes secondary in the customer's mobile phone buying process. Especially when Google will start selling phones which will work on multiple carriers' networks.
Today, people who want to buy an iPhone in the US have no choice but to sign up for AT&T's service. This is a result of the tight bond between carriers and handset makers. In the brave new world of tomorrow, the phones Google sell will work on any network. So, the carriers have to compete with each other to win the customer's business. They won't get customers simply because they have an exclusive deal with the manufacturer of a popular phone.
If Google didn't free the mobile phones and its users from the hold of carriers now, in a few years when mobile ads are a multi-billion dollar business, the carriers will balk at letting Google's ads travel through their networks as freely as those ads travel over the Internet now. Google would be forced to share a large portion of its ad revenues with the carriers who would function as toll-gate attendants over the highways of their networks. Only the toll would be too high. By offering phones that people would want and by making those phones workable on any network, Google is ensuring that carriers cannot hold its ad revenues to ransom in the future. By selling phones itself, Google alone is in control of what features go into those phones. This is Google's ultimate agenda.