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Some Thoughts on Google Selling Multiple Lead Devices to Avoid Carriers

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The big news of the day (other than Tim now joining me at Google I/O), is the WSJ report that talks of Google including multiple partners in their “Nexus” or lead device program. Their goal is to sell unsubsidized phones (full retail) directly through the Google Play Store to partially remove carriers from the situation. Now, people that buy these phones would obviously have to purchase a plan from a carrier, but there wouldn’t be contracts and you would be free to use your phone on the carrier of your choice, assuming their network supports it.

After this news broke, I asked for you to react in the comments. While reading through those reactions, I noticed some of the same points or questions being made over and over and wanted to attempt to address them here. Jump below to see what we’re thinking over here at DL. 

Would anyone pay for full priced phones?

This is the big one. People like getting deals, or better yet, they like buying phones at $200 rather than at $649. Subsidies by carriers allow this to happen, but what I would bring up is the idea that we all need to fundamentally rethink the way we value smartphones. People buy computers every couple of years for $600-$2000, yet they hesitate to spend more than $200 on a smartphone. Why is that? Good question, especially knowing that you use your smartphone a whole heck of a lot more than a computer. Why would you be willing to spend more on a computer, TV, or other electronic and not the piece of equipment that you spend your entire day with?

You also have to look at what Google is doing in the Play Store right now with the Galaxy Nexus. You can pick one up today for $399, which is only $100 more than what Verizon sold you the same phone for on contract (well, up until last week’s price drop to $199). I wouldn’t be surprised if Google tried to do this with all 5 of the devices that they plan to sell this Fall. This company isn’t stupid, people. They know that $600 phones aren’t flying off the shelves unless they are subsidized. But if they place them in the middle somewhere, and sell them to you as “contract free,” it could work.

And speaking of contracts, carriers are giving you this supposed $450 discount in order to lock up your business for a full 2 years. If you buy off contract, there is no locking up. You are free to roam to whichever carrier has the better deal, better service, and better product, whenever you please, assuming your phone has the radios to support that network.

So again, I understand the idea that people want things to be cheap, but if Google meets us half way and we start training ourselves to put more worth into a smartphone as the most used tool in our daily lives, this is magic in the making.

What would carriers think?

This I don’t think anyone knows. Google tried this approach with the Nexus One and failed miserably, so I can’t imagine they are all shaking in their boots. However, if you create multiple devices at reasonable unsubsidized prices, this could piss off some carriers. They make their money by locking you into contracts for 2 years at a time. If they lose that power and people start wandering around by themselves with freedom, how would they react?

This is just me throwing out random ideas, but what is to stop them from changing up their structure to make it more expensive for those who purchase phones directly to connect to their network? I don’t know if it’s legal or possible, but what would happen if we had three types of smartphone plans:  contract, off-contract, and prepaid? Right now, you can take an unlocked phone into AT&T and get the same price plan (minutes and data) without signing a contract (month-to-month) as someone that signed up for one.

Will Verizon ever get another Nexus device?

This is a tough one to answer. If we look at the direct sell model that Google is contemplating, I almost can’t imagine that they will or could in this sense. Unlocked phones and Verizon haven’t been used in the same sentence ever to my knowledge, mostly thanks to their CDMA network which isn’t accessed using SIM cards. Plus, since GSM tends to be the global standard these days, and one that Google supports officially through AOSP, it would be surprising to see anything with a CDMA radio in it available in the Play Store. We could still see carrier-tied Nexus devices, however, this just seems like Google has had enough with them and is moving back into their own phone selling business.

Now with that said, Verizon wants to have LTE everywhere that they have 3G by the end of 2013 or so. If that were to be the case, it would seem like an LTE-only phone would be an option. At that point, we would simply have to hope for an unlocked LTE-only device that included Verizon’s 700MHz frequency for quick SIM card swappage. Why is it that I feel like they won’t let that happen either?

What other thoughts are you having?

  • wilson yyt

    How hard is it for Google telling say … Motorola to make an unlocked phone including both verizon LTE modem and international HSPA+ model, motorola is already selling the RAZR (and razr maxx) that does exactly that.
    Granted you have to hack the RAZR yourself but its already done

    I think the $399 Galaxy Nexus is selling like hot cake fwiw

    I dont see other google phones selling for more than $550

  • Akeem McAllister

    After reviewing the stunt Verizon is pulling with removing unlimited plans I think Google should seriously consider providing their own phone service. That way they can just cut out the middle man (Sprint, Verizon, AT&T and T-Mobile) since they already have the OS. I will even consider getting an iPhone if Apple offer phone service.

  • angermeans

    The reason android is so popular is the mid range to low end market. People want a deal. The only high end android phones tat are being sold in mass quantities (outside of people like us) is the droid lineup, Samsung, and some HTC phones (Evo etc). The majority have what we consider low end. The reason people are upset with android is these OEMs aren’t being responsible and updating the many bugs and keeping their phones up to date. Samsung and Motorola have released dozens of phones and most never see even one or two bug fixes. Google needs to tighten the reigns as we are begin in to see average consumers dthing android for he 99 dollar iPhone 4 which is by far the best bang for the buck with what it offers. Android will start to see some problems if they cannot adapt and these OEMs protecting the user base.

    • Palmer Nyako

      I agree 100%.
      I’ll be honest, i wish android was a little bit more closed. I thought they tried to do that at a previous Google IO, where they put some responsibilities on the carriers, but still the carriers kept on with their shit.

  • newbieguy

    Firstly, I don’t like the idea of multiple Nexus phone devices….it detracts from the concept of “flagship” device. If these manufacturers go into this knowing that they are putting out a stock android phone that will compete with other stock android phones – all of which are “Google approved” Nexus devices, they lose their competitive edge (their OEM customization). I don’t think it would be likely that multiple manufacturers would go into this arrangement.

    technical questions:

    What is the possibility of inter-carrier-operability of these devices? what technology would be used? would some be “carrier-restricted” “carrier-optimized”? My understanding of the current technology of LTE is that it has similarities across the networks here in the US but use different spectrums. However, how many of these phones are relying only the LTE technology and not both LTE and 3G? As it stands, doesn’t Verizon offer 3G voice and LTE data on their 4G LTE phones? Would a LTE-only phone that works over broad spectrums be possible to work on multiple carriers?

  • http://www.tedpavlic.com/ Ted Pavlic

    It’s funny. All I can think while looking at this post is, “Man, I hate PenTile.” :)

  • Mete ASLAN

    In Turkey we don’t have contracts. So being able to choose from 5 nexus phones is heaven,
    if you think that we already pay lots of money for smartphones with custom ui and not updatable (like the one now I’m holding: original sgs)

  • grudge

    The Goog is taking over Motro. The latest big gun Motro phones (Bionic, Razor/Maxx, D4) seem to have disabled GSM radios that can be activated with a relatively easy hack. Swap sims and the device changes providers. See a possible trend here?

    I know when the contract on my Bionic is up, if Big Red ends unlimited data, I’ll be hacking away and looking for the best deal out there.

    We’ve been arguing whether it was Red or Motorzilla locking phones. Follow the money. Who has the most to lose if customers are free to jump ship if the deal or customer service is sucky? Don’t know about most, but I’d put up with a net-only provider store if they had the best deal on pipeline, and buy my phone from whichever manufacturer had the hardware and software I wanted. Means network providers and hardware manufacturers would have to really compete. This is bad because?

  • elliot323

    I’d buy a phone from them off contract but I would want a discount on my plan because I’d still be paying for a phone subsidization that I’m not using. I’d want either that or still have the ability to get brand new phones through my contract to sell on eBay.

  • gorkon

    There’s a lot of hubris in this post about whether Verizon would be included in this plan. I think that they will form some of the reasons stated in many of the comments. Verizon is a BIG network. That’s why Apple went there. That’s why Google should continue to want a Nexus on Verizon.

    They do not need VoLTE or LTE only phones on Verizon to make this happen. The SIM card is used for BOTH CDMA and LTE. What they need is a chipset that supports both that does not have a closed driver. They also need Verizon to not be so heavy handed. Verizon, in turn, needs to look at WHY it has to act this way. They don’t on iOS devices….why is Android different?

    If JUST one of these carriers would drop all of the carrier branded services and JUST be a provider, I could see that as being very lucrative for that carrier.

    We don’t WANT carrier branded things like VZ Navigator or VZ anything. We want fast and reliable service so we can access the same stuff we can access at home.

    • gorkon

      Almost forgot….as for the subsidy….most phones aren’t worth the unsubsidized cost. Just look at the teardowns on iSupply. Subsidies made sense back when a device was 600-700 without it. When phones approach 100-200 without it, the ETF’s are pure profit.

    • florious80

      I just want to point out something, not that I agree/disagree with what you are saying here, but CDMA definitely does not use SIM. Only the LTE part uses SIM on a 4G Verizon phone.

      • gorkon

        Not what this is saying:

        http://www.androidpolice.com/2011/12/19/this-is-why-your-verizon-galaxy-nexus-or-other-4g-lte-vzw-phone-is-losing-data-signal/

        This says both 3G and LTE use the same authentication system. Hence why they switched to a SIM. Pull your sim and see if your phone works any more if 3G doesn’t use it….

        • florious80

          I guess you are referring CDMA in terms of data. Then yes they both use the SIM card. Your original comment sounded like CDMA phones in general also use SIM card. (that why I said “on a 4G Verizon phone”) But as we all know, DROID line (non-world phones) that are not 4G but is CDMA, does not use a SIM. This is really the system Verizon chose to be on and will probably change in the future when VoLTE becomes the standard, since the hand-off between the 2 standard is laughably bad.

          • gorkon

            Um….none of the new Nexus phones would be CDMA only. CDMA only isn’t happening any more so why should I even care about that??

            I am mostly concerned with here on out.

  • Bryan schultze

    Verizon better get the next nexus or i will find myself learning a new
    OS. I’m sick of Google blaming everyone else. Learn to support cdma and
    bring out the phone. At&t and T-mobile both suck and its not worth
    going to there network for a phone if my costumer experience is going to
    be that bad. Step up your game Google if you want to continue to be on
    top.Its not open to everyone if its only for a couple of networks.

  • ocdtrekkie

    LTE-only can’t happen until Voice Over LTE (VoLTE) is in place. Right now, voice calls on LTE phones are over CDMA or GSM.

  • jaxxmjd

    “People buy computers every couple of years for $600-$2000, yet they
    hesitate to spend more than $200 on a smartphone. Why is that?”

    Because I’m already paying for a contract, so I’d prefer to get the subsidy as a bonus. I have enough expenses as it is. So long as I’m grandfathered into Verizon’s unlimited data plan, I won’t be bouncing between carriers.

  • http://www.facebook.com/steven.bobulsky Steve Bobulsky

    After reading this, I realize I have bought my LAST contract phone. Took this to wake me up. Verizon will have to fight for my business rather than use the proverbial “velvet chains”.
    I feel like a freed serf.

    • PC_Tool

      This sounds great at first glance…until I realized I would be losing my unlimited data and my only carrier option among the big 3 (4?) for not paying for the device twice (same plan cost as subsidized pricing on a non-contract device) is T-Mob.

      Meh…

      Sadly, Verizon’s LTE and unlimited data have me locked in. I’m unwilling to lose either at this point.

  • RaptorOO7

    Sounds like a great idea for Google, but as we all know Verizon and Sprint will not play along so that will have a major impact on US sales by reducing access to a large portion of wireless subscribers. I would like to choose the phone I want based on the specs I want and not have to wait 5 months for an update due to carrier hold ups. After all what good is it to have a Nexus device if you can’t get timely updates, that IS the point of a Nexus isn’t it.

  • Lucas Monroe

    I just don’t understand how the iPhone can be updated with the latest software without any carrier involvement straight from iTunes but Google can’t manage to do this. It makes no sense to me why we can’t get updates straight from the play store instead of waiting on Verizon to send it out. Can anyone enlighten me?

    • ERIFNOMI

      Google can’t possibly be responsible for the software of every Android device, especially with OEMs pumping them out so quickly with so many minor variations between versions per carrier. Apple makes iOS and the hardware that it’s built for. That’s two phones (current version, anyway), tablet, and PMP. Google has very little to do with your phone’s software directly. If you have a yakju Galaxy Nexus, you can get builds directly from Google, or compile them yourself with work directly from Google.

      • Lucas Monroe

        I do have a Galaxy Nexus. And it being a “Nexus” should mean that I can get updates directly from Google without having to worry about Verizon. Thus being able to update from Google Play Store only makes sense.

        • ERIFNOMI

          If you have a VZW Galaxy Nexus, it doesn’t work that way.

  • DisjointedWarrior

    As an employee of one of the “big” carriers and I remember what Android was before Verizon… It was nothing… They had a few devices on T-Mo, and 1 device on Sprint with very little impact. Then came the Droid.

    Now I cannot blame Google for looking at their options, and I know Apple is looking at something similar. Whats to happen when people switch to their inhouse MVNO’s, and carriers have less revenue? Well, the network would suffer. I know Verizon pays over 10 billion a year to make their 4G Network the best of the best. Before that they sunk 5 billion a year into their 3G Network, which is why Verizon has such a good network.

    Apple is perfectly happy off the revenue they get for forcing the carriers to pay them ridiculous amounts for the iPhone. They are also shrewd about getting Carriers to pay part of their monthly access. As for Google, I know that the Carriers have been especially good to Google, it provides an alternative to the iPhone, and Carriers make more revenue on Android devices.

    I also remember the first Nexus device, how it came out 3 months after the Droid that started it all, and it flopped on their online store. I just can’t help but think if they did this it might kill Android.

    Being a die hard fanboy I don’t want to see this happen.

  • pball_inuyasha

    “Good question, especially knowing that you use your smartphone a whole
    heck of a lot more than a computer. Why would you be willing to spend
    more on a computer, TV, or other electronic and not the piece of
    equipment that you spend your entire day with?”

    I just want to say that sounds like a huge generalization. Though perhaps since this is a phone news site many people who visit here do use their phone a lot, but I don’t really use my phone that often on a normal day. Paying even a third of the 1200 I spent on my computer really doesn’t seem like a good investment. Especially since I’d be paying monthly on top of that, something most other electronics don’t require.

    Though after saying all of that it would be really nice to be able to get a stock android phone with really good reassurances of updates and stuff. The price and getting phone service seem to be two things that would be deal breakers for many though.

  • http://ThisWeeksBeats.com Deez

    1. Pay $200 to upgrade phone and renew contract for 2 years.
    2. Sell phone on eBay for $500-600
    3. Buy Nexus from google for $400.
    4. ????
    5. Profit – $200 (AND an unlocked Nexus device!)

  • http://twitter.com/usurpermaximus Magnus Maximus

    I cant see Verizon being TOTALLY left out of the picture. My guess is if LG, Samsung, HTC, and Motorola all made a Nexus device only one would work on Verizon and the manufacturer would have to “Pay” Verizon for approval. The one thing Verizon has that a Sprint and T-Mobile doesnt is customers…the manufacturers will WANT access to those customers even if they have to subsidize Verizon behind the scenes…say $20-50 bucks a phone and the VZW version cost $450 instead of $399.

  • yarrellray

    As far as I am concerned VERIZON can go ”F” themselves the WORST thing Google did was select Verizon for the Galaxy Nexus. I use to FLAME on Verizon when I was a Sprint customer now being a Verizon customer with 2 lines of service I know THEY SUCK. The CDMA Galaxy Nexus on Verizon is the WORST out of all Nexus devices that was already proven to me by looking at the unlocked version my friend is using on T-mobile. The time has come for Google to seize control of all this crazy stuff/excuses carriers are using to deminish the NEXUS BRAND. If Verizon was going to treat their version of the Galaxy Nexus as they have then google should’ve never given them the device chance in the first place. Their network is overrated at best and we won’t even get into the update crisis they have on all the device they carry none have ICS but the Gnex. The sad truth is even the Sprint CDMA Galaxy Nexus is running 4.0.4 why is the Verizion version still stuck on 4.0.2 that’s because Verizon sucks. Overrated network+poor signal strength+Over charging for devices+ plus poor updates all total a complete waste of time for all customers who current hold the Verizon Galaxy Nexus. Being number one in the carrier game doesn’t always assure the best quaility service. My next NEXUS will be brought from the google play store this november and will have jellybean. At which time I will happily DUMP VERIZON and sell my current Galaxy nexus to the highest bidder.

  • DJyoSNOW

    I do like this idea of standing up to corporate cell phone carriers! Though for anything over 400, would have been take a lot of soul searching & also need to be pimp. I say I like the idea of not being per say stuck in a 2yr, contract. Though I would hope insurance would be an option.

  • http://twitter.com/ToysSamurai Toys Samurai

    >> At that point, we would simply have to hope for an unlocked LTE-only
    device that included Verizon’s 700MHz frequency for quick SIM card
    swappage. Why is it that I feel like they won’t let that happen either?

    They won’t let that happen. I recalled reading it from a Verizon forum. They didn’t deny it completely, but the answer is basically they will only allow phones that they have “tested” to be activated. So, you may buy a “Droid RAZR Maxx HD 3D 2013 Edition for Verizon” in full price from someone in eBay to replace your Galaxy Nexus next year and activate it on Verizon because that RAZR-whatever phone would be a Verizon approved phone. But if you want to bring in a Verizon LTE compatible phone that has not been approved by them, even if you put in your SIM, your phone will still not be activated.

    Just look at the iPhone 4S — it supports both CDMA and GSM. But even if you buy it unlocked, you still can’t use it on Verizon. Frankly, if Apple cannot convince Verizon to allow that, I highly doubt Google will have better luck.

  • Austin

    The real problem here is the carriers, they wont let google update any device without approval. I mean serously whats google gonna do make update to crash devices, carriers need to step back and allow google to update device whenever they need to. There needs to be a contract between the the carriers and google for pertection purposes but thats it, verizon messed up the whole nexus experince by the outragous time they take to approve and test updates. I dont blame google one bit for wanting to go this route, however this could be a power mover by google to intemadate the carriers to back off and let google update devices in a timely manner

  • nimbyist

    You know how this can work? If Google bought a MVNO themselves.

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