SAN JOSE, Calif. — Google, already a disruptive
presence in the mobile phone industry, seems to be itching to reshape it once
more.
As early as January, the company plans to sell directly to
consumers a new smart-phone that will not be “locked” to any wireless
carrier, according to published reports. That means consumers could pick which
carrier they want to use among those whose networks are compatible with the
phone.
Under such an arrangement, consumers could potentially pay a
lower monthly price for cell phone service and do so without having to sign up
for a long-term commitment. The catch is that they’d likely have to pay more
upfront for the device.
Selling “unlocked” phones is the norm in Europe but
has never gotten traction in the United States. Carriers here typically
subsidize the cost of the phone, selling them for $200 or less,
figuring they’ll make up the loss by locking consumers into two-year service
contracts.
“Everyone keeps asking for unlocked phones, but you’ve
got to remember that unlocked phones are $500 or $600,”
said Ken Dulaney, an analyst who covers the mobile phone industry for Gartner,
a technology research firm. “I don’t think the market for unsubsidized
phones is all that great.”
Google’s exact plans for the device are unclear.
Company representatives have said little about the phone, other than to
announce on a blog that they were distributing it to employees and would be
using it to test out new features on its Android operating system.
The company could choose to do something in between making
an exclusive deal with a carrier and selling a full-cost phone. It could allow
carriers to offer discounts to consumers who link up with them. Or Google could
even directly subsidize the device itself, with the idea of making up the cost
through the sales of advertisements sent to the devices.
But such strategies are risky. Google has little
experience at direct sales of devices or brokering deals on behalf of
consumers. And other companies have had little success in offering low-cost
technology products that recoup the discounts through advertising.
More than 90 percent of phones sold in North America are
sold through the wireless carriers, noted Avi Greengart, an analyst who
covers smart-phones for market research firm Current Analysis. Meanwhile, U.S.
consumers are used to buying cheap phones; Nokia and other
manufacturers that have tried to sell unlocked, unsubsidized phones here have
largely failed to find customers.
That said, Google shouldn’t be underestimated.
Despite the fact that phones running on Android have been on the market only a
little more than a year, the company has already shaken up the wireless phone
industry.
Thanks in large part to pressure from Google and
new federal regulations that the company has been pushing, carriers have been
dropping some of their restrictions on the type of devices that can use their
networks and applications that consumers can run on those devices.
And Google’s investment in Android — coupled with Microsoft’s missteps
in developing its Windows Mobile operating system — has helped undermine Microsoft’s position
in the smart-phone market. In the past year, Motorola has ditched
Windows Mobile entirely for Android, and other phone manufacturers are making
similar moves.
Also, applications such as Google Voice, which allows
consumers to have one phone number that will ring multiple phones, and Google
Maps Navigation, a free turn-by-turn navigation service that comes with the
Motorola Droid phone, are changing consumers’ expectations for what they can do
with their phones and how much they should expect to pay for those services.
But already?, Google has had a big impact on the
market without putting many Android-powered phones in consumers’ hands. In the
third quarter of this year, consumers worldwide bought 1.4 million Android
phones, representing just 3.5 percent of the total global market for
smart-phones, according to Gartner. In the same period, they bought 7
million Apple iPhones and 18.3 million devices running the Symbian operating
system.
Google has been “extremely successful, though not
yet in terms of devices on ground,” said Greengart.
But Greengart and other analysts expect market success will
eventually come for Google. In the past year, the number of different
devices running Android has grown from just one to about 20. Gartner expects
Android to be the second-most-popular smart-phone operating system behind Symbian by
2012. Currently, it ranks 6th.
However, analysts generally think that the unlocked phone,
dubbed the Nexus One, which the company reportedly began distributing to
employees last week, will do little to help improve Google’s position
in the market. That’s because Google would have to upset some fairly
settled consumer behavior.
“They can certainly try selling something unlocked, but
good luck with that,” said Greengart. “Unless Google sells
it in some subsidized fashion, consumers are going to look at that and say,
‘ha!’ and buy a $99 or $199 phone.”
Via McClatchy-Tribune
News Service.
