Mobile Neutrality and the Google Phone

 |  Includes: GOOG, VZ
by: Yankee Group

By Carl Howe

Not satisfied with Verizon’s (NYSE:VZ) recent launch of its Android-powered Droid phones, Google (NASDAQ:GOOG) is now rumored to be launching its own phone. What’s unanswered in the post, though, is an important question: Why?

Now, I don’t have any inside information from Google. But given that phones like the Motorola (MOT) Droid already have the latest and greatest Android 2.0 software on them, it doesn’t seem likely that the phone is going to be differentiated significantly by the user experience. Further, given that the hardware will be built by an outside manufacturer, it seems similarly unlikely to have some brand new hardware feature set.

Instead, I see Google launching a phone, should it choose to do so, with a unique value proposition: mobile network neutrality. A net neutral Google phone could set the mobile phone market on its ear by sporting:

  • No carrier lock. We’ve seen time and time again that consumers want to buy handsets and then use them on whatever carrier their household feels provide the best value to them. If Google were to go to market with their own phone, I’d expect Google to launch with an unlocked dual-mode GSM and CDMA phone, allowing it to work on any network. No carrier would want to release such a phone because carriers want subscribers locked to their networks, but a universal phone would fit right into Google’s net neutral philosophy.
  • No subsidies. Without a carrier sponsor, Google’s phone would sell at full hardware price, probably in the $400-$600 range just as the original Apple iPhone did. Andy Castonguay has made the argument for how disruptive this approach could be nicely in his recent report, “The Golden Subsidy Egg’s Goose is Cooked”, so I won’t repeat it here. But suffice it to say, Google could start a trend here that no business analyst at a carrier could get behind, yet result in making carriers more profitable in the end.
  • No feature limits. We’ve seen carriers eliminate or restrict the use of Android handset features ranging from WiFi support to multiple email account synchronization. With no carrier sponsoring the phone, a Google branded phone could include all the features that Android supports without having to bow to carrier restrictions.

This is the sort of phone that only Google could build and sell, simply because it has no vested interest in preserving the handset or carrier status quo. In a world where consumers regularly complain about carriers, a net neutral Google phone could be a product whose time has come.

The only question is when you can actually buy one. If rumors are to be believed, it could be next year.