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Summary:

Rumors of a follow-up handset to Google’s Nexus One phone are filtering through the web with Nov. 8 the reported date for such news. Could a Nexus Two succeed in reducing carrier control where the Nexus One failed? It could if Google adjusts these five aspects.

Nexus One featured

Rumors of a follow-up handset to Google’s Nexus One phone are filtering through the web, with Nov. 8 the reported date for a formal announcement. The date coincides with a previously planned Samsung press event, and that’s no coincidence, says Taylor Wimberly of the AndroidAndMe website. Citing multiple sources, Wimberly reports that unlike the Nexus One made by HTC, a Nexus Two is coming from Samsung, which has already sold more than 5 million Galaxy S handsets running Android, largely due to one device design for multiple carriers. Like the Nexus One, a Nexus Two has little chance of reducing carrier control, unless some key changes are made.

1. Bring on the bands. The Nexus One was originally slated to come in different models due to the four major U.S. carriers: three of which use different 3G frequencies. That’s because consumers here typically pick their carrier first, and their phone second. To enable more choice, a Nexus Two would have to follow the lead of Nokia’s latest smartphones, which have pentaband radios. The Nokia N8, for example, works here on either T-Mobile’s or AT&T’s network, in addition to hundreds of carriers using the GSM standard around the world. One version of a Nexus Two wouldn’t work for all U.S. carriers, however, as Verizon and Sprint use CDMA technology, which isn’t compatible with GSM. Then again, we’ve seen a few “world phones” that work on both CDMA and GSM networks, so ideally, a Nexus Two would follow suit. An integrated SIM solution similar to what Apple is reportedly working on with Gemalto could help both in the U.S. and overseas.

2. Keep it stock. Part of the appeal of Google’s Nexus One is that it uses the stock, or basic Android interface. Some might question that as an advantage because they might like the custom interfaces offered by HTC, Motorola or Samsung, for example. As nice as they all are to use, custom interfaces hinder the software update process. It takes the manufacturer time to integrate their interface with each new Android update. More importantly, keeping the stock interface allows Google to push out timely updates to a potential Nexus Two user base. In most cases today, smartphone updates go through the carrier, which allows them to pull native features, such as the Wi-Fi Hotspot function found in Android 2.2.

3. Replace the carrier subsidy with a Google subsidy. American consumers still aren’t used to paying full price for phones, nor do most even know what the full price is for their handset. Carriers heavily subsidize hardware to lock customers into a two-year voice and data contract. A Nexus Two could change that if Google decides to pick up the subsidy instead of selling the device at full price, which is what it did for the Nexus One. Google can afford this approach; it took in $7.29 billion in ad revenue last quarter and said that mobile advertising is adding $1 billion in revenues. Even by paying for the hardware, Google will make money back through mobile ads and the harvesting of user preference data.

4. Keep, but adjust the sales model. Google almost got it right by selling the Nexus One solely over the web, but a more aggressive approach could undercut the carriers and wouldn’t require the Nexus Two to be sold in stores. Google should simply send a free Nexus Two to any consumer that requests one on the web. The catch? Consumers would have to send in their old phone to Google for recycling within 30 days, else be charged a fee for the Nexus Two. Customers with a SIM card could just swap phones and return the old handset to Google for recycling, thereby adding more Android money makers to the smartphone market for the search giant whether the carriers like it or not.

5. Swing your partner. While these approaches might begin to reduce carrier control, there’s still a big elephant in the room: Google’s Android partners could easily feel threatened, as Google’s own phone would be an immediate competitor. But few, if any, seemed threatened by the Nexus One, although ultimately meager sales likely played a factor. Still, a stock Nexus Two needn’t threaten handset makers that want to use Android any more than a stock Motorola device threatens a stock HTC phone.

The manufacturers using Android as a base platform are already trying to differentiate themselves from others now: look at the Motoblur, TouchWiz and Sense interfaces from Motorola, Samsung and HTC respectively as examples. There are ample opportunities for handset makers using Android to differentiate with user interfaces, software, services and even hardware. If the alleged Sony Ericsson Playstation phone is real, it’s actually a perfect example of handset could use Android in competition with a Google phone and not feel threatened at all.

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  1. Love the creative thinking, but cutting distribution partners off at the knees is a fast ticket to the grave.

    Carriers would love to see Google take on the financial burden of 100 million free phones – they’d just refuse to support them, Google would be out $40 billion and a thorn would thus be pulled from the sides of AT&T, Verizon et al.

    Nexus phones should keep pressure on carriers and OEMs (hello, T-Mobile G2 OS locking), not replace either.

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  2. Gotta wait and see if Nexus Two ships with Froyos bandwidth sharing for up top six other computers via wifi.

    That is what the carriers keep choking on.

    If no sharing, then sure, this posts altruistic vision very likely.

    If yes, for-effing-get-it.

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  3. they also need to make google voice voip on mobiles so we can break away from carriers completely.

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  4. Manufacturers should differentiate through compelling services (like HTCSense.com) and hardware…and whatever else they can come up with, but NOT through custom interfaces. I hope we’ll start seeing less and less of those. Those custom skins are ruining Android’s branding because it confuses people and they don’t know what Android really is – I mean mainstream users.

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  5. It’s nice to play make-believe, and to wonder “what if Google really wanted to do what’s right for consumers?”, but that’s not how the world actually works. What is Google’s incentive to do any of this?

    If Google makes a Nexus Two and can sell it to carrier-partners for $400 per unit, why would they want to give it away for free? I’m sure that, during the lifetime of a handset, Google probably wouldn’t make enough search- and app-revenue to justify the cost of just giving the phone away for free.

    Also, let’s not forget that, as long as Verizon is a dominant player in the market, this can’t even happen. Verizon doesn’t allow unlocked devices onto their network. The Nexus One was supposed to come to Verizon… then Verizon said no, and Google told everyone to just buy the Droid Incredible instead.

    For better or worse (actually just worse), Google is now in bed with Verizon. So much so, that Google was actually willing to give up on net-neutrality, something that Google had originally championed. If Google sold-out on net-neutrality, do you really think they’re going to now turn around screw the carriers? No.

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  6. Breaking carriers’ control seems to be hot topic these days at GigaOM. Still, lets not remember that Carriers have invested billions dollars to build these networks and get regulated licenses.
    One credible way to fully “control user experience ” is to move toward a global, multicarrier MVNO model…via in-phone SIM ( see Stacey’s post yesterday).

    We often underestimate the difficulty of breaking carriers’ control. Selling handsets and apps online even with subsidy is feasible. This said, who will handle the local support ? I just dont see Google supporting subscribers in Pakistan, Mozambique, Bosnia etc …. and it’s not even sure how the regulations in such countries will take it.

    When the MVNO phenomenon started, most carriers were reluctant. Today, many european carriers count 20 MVNOs.
    Initially, they just sold SIM cards and handsets …but still use the carrier’s billing system. Recently, carriers have opened their networks, allowing MVNOs to build their own price plans, rate and bill their own subscribers…
    Larger MVNOs (often mass-market retailers) now …have their own subscribers, rate and charge them while regularly using the network.

    So Google should just take this move and define an “Android MVNO strategy”.
    just my humble opinion.

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  7. 6. Learn how to provide real customer service. This is still a big weakness for Google.

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  8. They should be looking at making a phone that works with Skype so people don’t have to pay so much for service. And the carrier wars could end!

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  9. 2 comments:

    I feel major factor for Nexus One model’s demise was poor support from GOOG. Operator, however bad you may think, adds a valuable service in providing quick support. On the other hand, GOOG promised to support all customers via website with 48 hrs:)

    GOOG cannot provide $200 subsidy to the consumers. Eric Schmidt said that goal of GOOG is to make $10/user/year. Operators make $1200/user for 2 year contract in data plan + voice at a min, so they can afford subsidy of $200.

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  10. Interesting post, Kevin, although I think your presumption that Google would want to “break carrier control” is wrong. Given it’s much-publicized love-in with Verizon over network neutrality, it’s pretty clear that Google will happily sell its own principles down the river in order to keep the carriers on-side. There’s no way it would anger them for the relative-peanuts it would make from a Nexus Two phone.

    Secondly, I should point out that the idea that Google can subsidise a phone to a significant degree through advertising is a non-starter. Assume that Google subsidises by $200. Where is the incremental income to Google over and above another Android phone? If someone buys a Nexus Two rather than a Samsung Galaxy, where’s the additional money to Google which justifies that $200 subsidy?

    Unless Google can add $200′s worth of additional ads to a Nexus Two over and above what a user would see on a Galaxy, there is no way it will get that money back. And Google is many things, but foolish about ad revenue isn’t one of them.

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