If Not Google, Who Will Change Telecoms?

A couple weeks ago, word of a Google phone began leaking and the geek web basically exploded with excitement. With rumors circling that the phone would be sold entirely unlocked - meaning that buyers could use it on any cellular network - those of us waiting for some force for change in the phone service world salivated with anticipation. Yet as more details emerge, it's clear that Google will not be our savior. At least not yet.

While Google's Android operating system has been released on a number of phones, including the Droid most recently, the forthcoming Nexus One will actually be produced by Google itself - the company's first forray into hardware.

Unlocked phones are common basically everywhere in the world except the US. The idea is that you can simply swap out the SIM card and jump on a new network. When I'm in Uganda, for example, I have my main phone line using provider MTN, but I keep a SIM card from one of their competitors tucked away for the areas of the country where MTN doesn't provide great coverage.

In the US, the model is that users are locked into contracts - usually for 2 years. The (apparent) upside of those contracts is that the network providers like AT&T subsidize the hardware. For example, the iPhone cells for $599-$699 without a 2-year AT&T contract.

Yet there are many problems with the contract model. At the most basic level, it's pretty reasonable to ask whether the market is too stacked against consumers when the only real nationwide options required 2-year contracts that cost a few hundred dollars to break early. The lack of alternatives gives companies a pretty free hand to set prices as they wish, such as the incredible scam of SMS messages, which use a tiny fraction of the data that other services like voice and internet use, but cost hundreds of times more.

What's more, the fact of contracts sets off a cycle of consumer decision making that makes it more advantageous to sell the idea of better coverage than to actually build more network bandwidth. By that I mean, when I'm in Uganda, I buy a sim for a few dollars, charge my phone as I go, and if the network sucks, I switch. With that model, the best thing a telecom can do is actually be a better provider of bandwidth and give me clearer, more reliable service.

In the US, assuming my phone choices are relatively equal across networks, my choice also comes down to who has the best network. But because I'm signing up for a multi-year contract that is expensive to break out of, and because the geographic range in which I may use the phone is likely larger than my previous experience, I am more open to inducements and advertisements about the quality of networks compared to one another.

In this situation, it becomes increasingly beneficial for telecoms to spend their dollars on advertising, spin, and occaisionally outright deception to convince me to go with them versus the other guy. And once I'm there, it doesn't so much matter if I bitch and moan because they've got me locked in for a couple years.

This is the situation that has produced the endlessly annoying back and forth between AT&T and Verizon in which AT&T tries to convince consumers that its network is more extensive than Verzion's, without mentioning that the vast majority of its advertised coverage area is its slower EDGE network, not the increasingly standard 3G.

I tend to think it's a problem when an industry finds itself in a position where it is more economically sound to play good than to be good. I think it's a huge friggin' problem when the barriers to entry of that industry are so high that there isn't a clear opportunity for disruption unless it comes from an already established player.

That's why, at the end of the day, even though I had no plans to switch from my iPhone, I'm bummed that Google's phone will more or less function on the same model we have. TechCrunch's MG Siegler tries to spin a nice light on the situation, but for someone who deals with startups and whose teenage revolutionary fervor has shifted entirely to finding or building companies that break the back of lumbering, monopolistic, anti-consumer crapfactories, I still find it depressing.

Of course, this is just Google's first entre into the market. And it may be that the game they're *really* playing is to totally disrupt the telecom industry by accelerating VOIP service instead of playing the mobile voice game.

Still, I would have loved to see the Nexus One go farther. Maybe Apple should just begin laying the pipes and have the profits of the iPhone entirely to itself?

(Photo: Leaked Nexus One images via TechCrunch)