A move that would seem to alienate telcos, handset makers is really a wake-up call
Google's Nexus One smartphone is being sold online, giving telcos a miss. -- PHOTO: REUTERS
At first sight, Google's recent launch of its Nexus One (N1) smartphone appears to be an ill-advised move.
It threatens to compete against and alienate its handset partners like Motorola, HTC, Sony Ericsson, LG and Samsung, which have been rolling out their own smartphones running on Google's Android operating system software.
With their help and investments, Android phones are now making an impact and are expected to surge from their current 2 per cent global market share of smartphones to 14 per cent in 2012 - placing the search giant in second position behind long-time market leader Symbian (most commonly found in Nokia phones).
And by selling the N1 directly to customers through its new Web store, Google is ruffling the feathers of telcos globally which might see their direct relationship with consumers using lock-in contracts weakened.
Although the N1 was technically launched only in the United States, Google is officially shipping the N1 to Singapore, Hong Kong and Britain. Even Singapore's telcos will be affected as Google's Web shop now lets consumers order the latest phone immediately and forces the SingTels and StarHubs to move faster to get the best phones in sooner.
SingTel, for instance, is launching a Motorola Android phone here this week (new to Singapore, but already launched months ago worldwide). But with the latest top-of-the-line N1 now available via a three-day DHL delivery, it has taken the shine off the impending launch.
In one swift move, Google risks making enemies of the entire industry - the handset makers and the telcos of the world. Has it gone mad? Hardly.
Google has proven itself to be a master strategist in the way it works.
When it was a dwarf, it played its role as a humble free search engine for the Web, making friends with everyone and enemies with no one. But since becoming a public-listed behemoth, Google has pulled out all the stops to compete and is not afraid to ruffle feathers.
Google may be every consumer's best friend, but it has created enemies among other tech giants, in particular Microsoft and now Apple. But even Google is no fool: It too knows it cannot be an island.
Google disrupted the tech world by giving out free software to consumers. Unlike other tech companies which make money by selling products, Google earns money from online advertisements, and the more people get online, the more Google earns.
In my opinion, that core business model has not changed, even with the N1 launch. But Google is in a hurry. Revenue from the PC-based Web world has slowed down and Google aims to make the mobile Web its next advertisement frontier.
Integral to that strategy is for Google to grow the base of Android phones. If Android becomes a dominant phone platform, then Google can make its apps and ads optimised for the phone. At the same time, it is insurance against other phone platforms blocking its apps, as Apple did when it blocked Google Voice from the iPhone's App Store in July last year.
By adding its own brand name to the N1, Google makes the media and consumers sit up and take notice. It works, which explains why I bought it when I already have an excellent three-month-old HTC Hero (also Android).
The N1 is designed by Google but made by HTC, so if the phone sells well, HTC benefits. But by choosing HTC over other handset makers, Google risks alienating them. In my view then, Google will definitely work with all of its key handset partners to roll out the N2s and the N3s, so everyone stands to benefit.
So when Motorola's co-chief executive Sanjay Jha arrived rather late for the N1 press conference due to a 'traffic jam' and then went on to give the thumbs up for the launch, it was, in my view, a subtle reminder to Google to not forget its friends.
In fact, Google calls the N1 a superphone, trying to create a premium class for the best Android smartphones which passes its own rating. That too is a strategy to encourage handset makers to accelerate the development of the best hardware to run the latest star-spangled Web apps smoothly.
But the handset is only one-half of the equation in Google's push for the mobile Web to catch up with the experience of the PC Web. The connection is the other.
The ideal world for Google is akin to the PC broadband world where Internet service providers simply sell lines with no say over the consumers' choice of device or software. In that open world, which Google is accustomed to, the best and free software always wins.
In the not-so-open mobile world however, the telco has a huge influence over which mobile Internet line you use as well as the device you choose to go with it, simply because the vast majority of users choose to be locked into contracts for huge phone discounts.
The telco can therefore decide which handset to support, especially if it has an exclusive deal over a hot handset. It can even decide which Web app appears on its subscribers' screens. Verizon Wireless, the biggest US cellular network, last month force-fed Microsoft's Bing search engine on the Blackberries of some of its users and blocked out alternatives like Google and Yahoo!
The Internet threatens to destroy the telcos' core voice and SMS business. Google Voice (only available in the US for now), for instance, lets subscribers send free SMS messages and make cheap calls over Wi-Fi and 3G.
There are similar services in Singapore like Hoiio and pfingo Bounce. I used to pay $110 per month for my StarHub line, $80 for the 800-minute phone plan and $30 for my mobile data usage (there is a cap of $30 which I always bust). Last month, I switched to a $38 plan with 100 minutes and bundled 12GB of mobile data (I use only about 2GB every month). For my extra outgoing call, I am using Hoiio, which costs 3.8 cents per minute for local calls against the standard 16.05 cents telco rate.
Telcos are therefore rightly afraid of the mobile Internet and may take steps to slow its growth. In 2007, when the US government freed up parts of the old 700MHz analog TV spectrum for its new use as cellphone airwaves, Google actually placed a bid for the auction. Google never had any intention to become a SingTel or a Verizon. It was lobbying for the 700MHz chunk of the airwaves to be open to all cellphones and all apps. It was really a warning to the US telcos - open up or we will do it ourselves.
It was a classic game of poker which Google won. The launch of its online phone store is simply Google's next poker game. It does not expect that consumers will stop buying cheap subsidised phones in return for two-year contracts, nor does it really want to deal with consumers directly for retail. It certainly does not want to make the telcos its enemy. But it is a warning to telcos to buck up - or Google will take charge.
Madman or mastermind?
In one swift move, Google risks making enemies of the entire industry - the handset makers and the telcos of the world. Has it gone mad? Hardly. Google has proven itself to be a master strategist in the way it works.
Source: Sunday Times, 17 Jan 2010.
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