Even In the Android/iPhone Era, Carriers Dominate
The launch and availability of Google’s Nexus One smartphone last week reinvigorated the dialogue about how phone makers are changing the carrier model in the United States.
This is far from true.
Google offered the Nexus at competitive, subsidized prices with contracts with TMobile for $179 (or Verizon and Vodafone soon), and “unlocked” (without carrier contract) for $529. The unlocked offering was a pure marketing play to exploit Apple’s exclusive contract with AT&T, but it’s not unique. Nokia smartphones are also offered unlocked and at high price points in the United States, and every other phone, including the iPhone, is offered at subsidized prices with no contract.
Google didn’t break away from the carrier model, it reinforced it by offering the Nexus One with three carriers off the bat (whereas most phones only launch with one carrier) and selling the unlocked Nexus One at a high price point, driving customers to want to save money upfront with a carrier contract.
What has changed is that the marketing of phones has shifted from carriers to phone makers. Credit Apple. It has reinvented revenue opportunities by offering iPhones through Apple Stores and selling applications through the App Store. It has also shown that a focused phone maker can produce a better, focused marketing campaign for a single phone than a carrier can for its portfolio.
But this too benefits the carrier model.
The service contracts (Read: revenue) for the iPhone reside with AT&T, and operators supporting the Nexus One, whether it be the subsidized or unlocked phone require contracts. Apple has bought no spectrum, nor has Google, and until they do they will not be able to offer service for their phones.
Google and Apple have positioned themselves as thought-leaders and innovators over the past year, just like Microsoft and Palm did five years ago, and like their predecessors they haven’t changed the carrier service model – they’ve only supported it.
Paolo Mottola is a UWMCDM student and digital comms extraordinaire at PR firm Weber Shandwick. He can be found @paolojr and at his personal blog, Word Is Born.


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Gib Wallis
Paulo, we’re not quite yet in the era where everything can be flipped on its head because 3 of the four carriers for smart phones use completely incompatible wavelengths for 3G (AT&T & T-mobile are incompatible with each other and both are incompatible with Spring and Verizon).
But the Nexus One is a convergence of two things that are game changers when taken together.
First, a high-end smart phone that will be available in its first year of release on competing major carriers (T-Mobile & Verizon by mid-year).
Second, T-Mobile offers discounted voice/data/texting plans to people who purchase the phone without a carrier subsidy.
AT&T and Verizon and Sprint do not give you a $20 monthly discount if you go without a contract and pay full price for a phone.
Jan 30th, 2010
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