Come on, Google, subsidize me

Google is attempting an end-run around carriers to give customers more power to use its services. It should take the next logical step and subsidize customer adoption of its phone.

$529. That's the price of Google's new Nexus One and admittedly a small price to pay for the eternal bliss promised by its backers.

Google
For $179, you can get the same device through T-Mobile, because the wireless carrier expects to charge you $79.99 per month for at least two years. (For those who think AT&T's wireless service couldn't get worse, you're wrong. Try T-Mobile.)

If T-Mobile is willing to subsidize the cost of the Nexus One in return for a services contract, why isn't Google subsidizing the device, given that it's effectively a one-way trip into Google Land and all of its services?

Tom Foremsky rightly notes that "Nexus phone does nothing to challenge the power of the telcos," given that it leaves them in the position to dictate what customers can do with their phones.

He goes on to argue that Google should buy a telco and thereby assert control over the complete customer experience.

It's a nice thought (though completely out of keeping with Google's business model of leveraging others' infrastructure), but Google could get much of the way there, I suspect, by simply subsidizing the phone itself, thereby cutting into the telcos' leverage over their customers.

That's what the unlocked $529 version does, after all. It positions the customer to be one SIM card swap away from a new telco. It makes wireless competitive again.

TechCrunch groks this when it writes:

Is there any question what Google is doing here? They're taking the traditional mobile model in this country, where you first choose your carrier, and then choose your phone, and turning it upside down. It's what Apple started with the iPhone. But Google goes farther, because they already have multiple carriers....

Or, as Ars Technica's Jon Stokes argues, "Google's biggest announcement was not a phone, but a URL."

Bingo. And subsidizing the Nexus One would take this strategy even further.

Google "generates more money per unit of online end-user activity than any other Web-focused organization," writes Carmi Levy in BetaNews. Nexus One is an on-ramp to more online end-user activity and hence more money.

Why not subsidize that so as to keep that revenue stream safe from the prying hands of the telcos? And to head off Microsoft, which now has carte blanche to push forward with Project Pink?

Google is happily paying telcos as much as $25 to $50 per device to sell Android phones, as Benchmark Capital's Bill Gurley indicates. Why not "pay" its customers to use them?

Follow me on Twitter @mjasay.

About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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