Why Google’s Phone First, Carrier Second Model Should Be the Standard

Earlier today, Google announced that it was jumping back into the phone sales game and began offering the HSPA+ Unlocked Galaxy Nexus for sale on the Google Play store. It is compatible with GSM networks like T-Mobile and AT&T, and will cost you $399.00. For an unsubsidized phone, I would think that this would be a steal, considering Verizon lists the LTE Galaxy Nexus with a retail value of $750.

Google has done this before, of course, way back when it released the original Nexus phone, the Nexus One. Google’s master plan was to free the consumer from the hold that mobile network carriers have had on the market for years and years. Consumers would pick the phone they want first, and then pick the carrier they want to buddy up with.

Assuming phone manufacturers were up to building variants tailored to the different networks, this would enable more freedom, more choice, and more competition in the mobile market. It really can’t be all to difficult for phone manufacturers to do this these days, seeing as mobile chipsets are beginning to cram in support for a wider variety of wireless frequencies, so in retrospect not too many variants would actually be necessary (and in most cases, it would should probably be a software change).

So what’s so bad about carriers ruling the roost? Here are a few odd ideas:

  • Contracts – The evil of these things is something I cannot even begin to describe. Carriers will rope you in for two years with a phone that lasts one and a half (given that you are using it regularly, like most folks), at which point you will be suckered into a contract renewal for another two years. Consumers believe they are getting phones for free or for very, very cheap prices, but in reality that cost is simply subsidized, paid for by the gobs you’re paying into your contract with the carrier. Phones are little computers, and computers are typically big purchases, which means you should never be flabbergasted by the $600+ price tag on most phones and instead save up to pay for them like you would any computer (or other big purchase). The ability to buy a phone and then proceed to sign on with a carrier under a contract-less, prepaid plan would bring a huge relief to many consumers today.
  • Competition – When you’re roped into a contract with a carrier, it couldn’t care less about the service it offers you. If you threaten to leave the carrier and cancel your contract, it simply forces you to pay the early termination fee, which usually covers the cost of your expensive smartphone (on top of the bill you also have to pay for that month). This means that once you are in its ranks, you are trapped. It has no incentive, then, to work to improve its service. Rather, it does as little work as possible to maintain its current level of quality (if that).
  • Quality of Service – Similar to the previous point, carriers being at the top of the food chain introduces quality concerns. More often than not, when a carrier advertises, it is advertising the phones it offers with a little mention of its network’s service off to the side. Most carriers also devote a large portion of their resources working to provide a host of devices to rope consumers into contracts as well as promote and support those devices. If consumers instead bought their phones first, then decided on a carrier, those carriers would then be able to devote all of their time and resources on improving their networks as well as supporting their customers.

So in essence, putting the phones first and the carriers second (or at least, putting the carriers at an equal level to the phones) would ensure that the consumer’s choice is protected and that both the devices he or she chooses in addition to the service he or she selects are able to develop and improve independently. It would truly be a win-win scenario for everyone. I hope that Google continues to push this model. We can hope that it will be successful, and phone manufacturers and carriers alike can follow suit.

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  • David P.

    Problem with the two big CDMA companies (Verizon and Sprint) is that unless you happen to know the right people on the inside, you can’t just bring any old CDMA phone to them and use it on their network.  It’s got to be a phone that was setup for them to begin with.

  • Alan Wiggs

    “Should” doesn’t do much when there’s no impetus on the carriers, though. They have the stranglehold on customers and manufacturers alike that lets them get away with anything. If manufacturers tried to break away from this model and start selling direct to customers without carrier support, even if they could REMOTELY compete on price, all the carriers would need to do is require locked-in versions that they sell on contract. As long as customers are willing to pay higher rates and get worse service in exchange for cheap phones, the current system will persist. Google’s got no muscle to back up their (admittedly superior) business model.

    • http://eddieringle.com Eddie Ringle

      But manufacturers have more power over the carriers than you might think. All it would take is for the major manufacturers to prohibit their devices from operating on a carrier and we’d either see a standstill (which probably won’t happen because then both companies will lose money) or a resolution where the manufacturer comes out on top. Carriers are nothing if there are no devices available to access them.

  • http://www.facebook.com/dennis.coble Dennis Coble

    Thanks for sharing, Chris. I don’t use cell phones to date. I’m pretty sure if I ever do, I’ll wonder how I ever got along without one.

    • RaterKey

      WOW! I occasionally hear about someone without a TV. But you are the first person in a long long time that I read about not having ever had a cellphone :)  

      Anyway, nice RC car website.

  • http://twitter.com/andr3wjacks0n andrew jackson

    This isn’t new really if you think about it. You could buy unlocked phones and signed up with carriers contract free for years. Most people don’t know this I have not signed a contract for AT&T in over 5 years.  Also Europeans have been able to do this for years also.

    • http://eddieringle.com Eddie Ringle

      Of course this isn’t new. The point is that this is the second time Google has tried pushing this here in the US, so hopefully it sticks unlike its past attempt. The problem is that consumers are never going to buy phones at full price from the manufacturer (or a reseller) when the carriers offer them for dirt cheap or free.

      • Disgustipated

        i wouldnt say consumers are never going to buy phones at full price, others in my office and i have not purchased a phone directly from a cell carrier since the nexus one. one co-worker has actually purchased about 3 phones in the past 2 years out of contract and not from the cell company(yes, he has a problem lol). so generalizing that “consumers will never” is not very accurate.

      • RaterKey

        It really depends what the deal is like Eddie. Here in Europe you get some great SIM only deals and you get a lot of freedom by just buyign a phone like you would a laptop.

        I would never sign up for another “subsidized phone” type deal ever again. Even with a “free” phone. Long term I save money by getting my own phone when I want to.  

        The reality is that even here in Europe most people still go for the “subsidized phone” deals. But that’s largely because the majority of people aren’t very financially savvy. With the deal structures here you actually save money by getting your own phone. Plus I find that if you paid £400 for a phone you kind of appreciate it more than if you pay for it over the next 18-24 months with an overpriced phone contract.

      • http://twitter.com/andr3wjacks0n andrew jackson

        You shouldn’t say never. More people do this than you think, including myself. BUt it isn’t the most popular option. If these were $199 they wouldn’t be able to keep up with demand.

        • http://eddieringle.com Eddie Ringle

          Okay, “never” was a bit too strong. But it is definitely rare to hear of your everyday consumer opting to spend $500 or more on a phone over a free phone with a two-year contract. It’s the sort of instant gratification of not having to pay much money immediately that plays a role.

  • Winduberry

    It is so easy to cancel a contract and not get charged. Six years ago I had a contract with Sprint and they tried to charge me a cancellation fee so I went on line found a letter someone had posted, used their letter head and font, plugged in my account info, and mailed, plus emailed it back to them, and not only did they apologize, release me,from the contract no charge, but also got that month free.

  • Stlhobbit

    As much as I want a new iPhone 5 when it is released, I will stick with my old iPhone 3GS because I am disgusted with being locked in to AT&T’s pathetic coverage in Saint Louis.   Hello, Apple?  Are you listening?  Do you care?

  • http://www.freenclearstuff.com/ Amber Taylor

    My husband is actually looking for an unlocked phone for this very reason.  When I bought my iPad, I bought the one that had the ability to use a different carrier via a SIM replacement card as well.  It was a bit more pricey, but will pay off in the long run.

  • http://twitter.com/norton_g norton_g

    This is right on, I’ve replaced a Verizon phone paying their inflated price to avoid a contract renewal , and they make it almost impossible for you to do that.