Did you feel it?
For a brief moment over the weekend, the wireless world as we know it almost ceased to exist when Google announced on its blog that it was testing a new mobile device running its Android operating system. This was followed by a Wall Street Journal article that claimed the device would bypass domestic carriers and be sold directly to consumers.
I could have sworn I felt a tremor.
The initial reports indicated that Google planned on marketing the HTC-built smartphone, dubbed Nexus One, through retail channels to consumers who then could sign up for service with the carrier of their choice. It would have been the ultimate Christmas present to all of those open-access proponents who think the current wireless model of handset subsidies and contracts is leading the U.S. down the road to ruin.
However, further details of the device indicated that while it might indeed be sold “unlocked,” its embedded technology would limit the device to domestic GSM-based carriers – AT&T Mobility and T-Mobile USA – with FCC documents indicating that the device’s 3G components would only support HSPA technology in the 1.7 GHz band, which domestically would limit it to T-Mobile USA. What was once expected to be the first device available to everyone, is now expected to be available to everyone as long as they want to use T-Mobile USA’s network. Now that’s progress.
A Reuters report further noted that T-Mobile USA would likely offer a subsidized version of the Nexus One to consumers, which will sell alongside the unlocked version. Google already offers an unlocked version of its G1 for $400 without a contract, targeting Android application developers.
So, what was once expected to be a device that demolished the symbiotic relationship currently enjoyed by wireless consumers looking to get the most phone for the least price and carriers willing to provide subsidies on handsets in exchange for a contract, has quickly devolved into what appears to be just another device that will be available to consumers for a large sum, or through a carrier for a smaller sum. Progress indeed.
(Side note on the whole brouhaha over the current subsidy model. Why is everyone so against this? It seems to me that if a carrier wants to give me a substantial discount on a device in exchange for a contract that I can then break at any time for a charge that is less than what they provided to me in subsidies, I say let them do it.)
Handset industry heavyweight Nokia has tried this model unsuccessfully in the U.S. for years – though they have been successful in shocking people with what the true price of a mobile device can be if not for that dreadful subsidy/contract “trap,” and even Apple finally wilted to pricing pressure by allowing AT&T Mobility to heavily subsidize its 3G iPhone after the initial 2G version sold unsubsidized. Heck, Apple seems so comfortable with the carrier partnerships it has opened up its 3GS iPhone to multiple carriers in many markets and is rumored to be partnering with Verizon Wireless for its next foray into the mobile device space.
I’m not saying that the unlocked device model will not work or is a waste of time. It looks like it will be a major piece of carriers’ “4G” plans as they attempt to get as many devices as possible attached to their next-generation networks. Unlocked devices are standard operating procedure in most parts of the world. But, like flat-rate pricing for Internet access, the U.S. consumer has been brought up expecting wireless devices to be sold for less than what it costs to make them and it will be a considerable hill to climb for companies looking to change that.
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