Google's phone no match for cellphone contracts

Submitted by acohill on Tue, 01/19/2010 - 11:33

Steven Levy has a Wired article that illustrates some of the problems that Google, and by extension, all cellphone users face. The new Google Nexus One can be purchased unlocked and without a cellular contract. You can then (in theory) go to any provider and get a service contract. Except, as Levy points out, even if you paid $500 for your dandy new Nexus One phone, you are not likely to a) find a provider willing to sell you service, and b), if you do find a provider (T-Mobile is the only one so far), you won't get a discount on the service contract.

The only glimmer of hope is that with all the new iPhone imitations coming to market, the increased competition for smartphone customers, who tend to spend more because they buy both voice and data service, has lowered prices a bit. But the lower prices is so far limited to the unlimited contracts, which were already very expensive. The cost of these contracts is coming down by $20 to $30, but are probably still very profitable. When there is real competition, prices can and often do come down. But the cellular business looks a lot like a cartel, with cartel-like pricing.

This is an illustration of why open access networks, with community ownership, are so important. Only by making investments in owning some of the infrastructure do users (local governments, schools, businesses, residents) get some control over the market space. When telecom infrastructure is owned entirely by one company (e.g. phone/DSL, cable TV/cable Internet), the company that owns the infrastructure gets to set the pricing--and rightly so. I don't subscribe to the notion that incumbents are bad. They are making intelligent pricing decisions based on their asset and business models. Communities that want better and more affordable telecom services have to introduce different asset ownership models and different business models. It's not hard or complicated, and many communities are already doing this with excellent results. Call Design Nine (540-951-4400) if you want more information on how to get started.

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