Voice and Video


The new Google Phone strategy and its implications

Google officially announced the Nexus One today. It looks like a good phone, at last something to compete seriously with the iPhone.

There are many reviews already out, and it appears to be a good phone, but Dan Frommer is right in pointing out that the significance is that Google will sell the phone directly, on their Web site. This changes the buying model: consumers will go to the Google site to buy a Google phone, then choose their carrier and service plan. This turns the U.S. purchasing model on its head. Rather than visit an AT&T Wireless shop, to be greeted by iPhones, BlackBerries, HTC and other models, the phone choice will be first.

The second, more far-reaching consequence is that Google will determine both the hardware and software on the phone. Selling an unlocked (not tied to any carrier) phone allows it to circumvent the carriers' purchasing chains and QA labs.

Why would this be significant? I would relate two cautionary tales. First, Microsoft and Windows Mobile found that they couldn't influence hardware and driver design, and this damaged their ability to innovate. WM started out as a decent, even a leading OS for smartphones, but it soon became apparent that, since the carriers were the actual customers for the phone makers, they were the ones that called the tune with the phone vendors, rather than Microsoft. If Microsoft (or any third-party for that matter) wanted to see a capability on the phone, they could propose it, but the vendors would take their orders from the same place they received payment, and too often the wireless carriers were not interested in adding new features, both to save money and because they didn't fit their immediate marketing plans. There were other factors, of course, but for several years the carriers would routinely order versions of smartphones without Wi-Fi, for instance... this was a bad thing.

With their new model, Google is the immediate customer of the phone factory, and can specify exactly what the hardware will look like. They also control the Android software, of course, so they are now in a similar position to Apple, controlling the user experience... this is a good thing.

The second part of the selling model is in allowing Google to circumvent the carrier's control of software. Normally, a phone from the vendor's factory is already produced with the carrier's branding, and the carrier demands to specify and test what's in the software, allowing them to veto any undesired applicatoins. Even with third-party apps, we know from watching last summer's 'net neutrality' debate over the iPhone, with the FCC investigation of Apple and AT&T, that some applications for the iPhone were not approved. For instance, Apple's submission to the FCC included this gem:

"There is a provision in Apple's agreement with AT&T that obligates Apple not to include functionality in any Apple phone that enables a customer to use AT&T's cellular network service to originate or terminate a VoIP session without obtaining AT&T's permission."

Although Apple and AT&T subsequently agreed to accommodate net-neutrality, by the end of 2009 there were still no apps for the iPhone that use VoIP over cellular data networks - they all (Skype, etc) work only on the Wi-Fi connection.

Which brings up the most important opportunity for Google. As it sells an unlocked phone, developed to its specifications and running its own software (and third-parties' software), it can make a much stronger end-run around the cellular carriers, in particular offering VoIP over cellular data (the obvious strategy would be to combine Google Voice with Gizmo5). The carriers can still block VoIP traffic in their networks, of course, but this puts them on a collision course with the FCC.

Which would indeed put the cat among the pigeons.

It would also make voice over Wi-Fi very easy (the same SIP stack would be used on both sides of the phone) and open to door to a very simple FMC handover client. One can hope that even if Google doesn't add such a capability to Android, an industrious third-party will seize the initiative.

Time will tell, but it's a move worth watching and applauding.
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