Google sent me one of the unlocked developer Nexus One phones. It arrived today. And, in the wake of recent news about Verizon not after all carrying the Nexus, stimulated some interesting thoughts in my mind about where the cellphone market is going. The balance of power is changing fast in ways that are going to be very good for consumers.
Let’s start with the microlevel. Here is what switching over to the Nexus One from my G-1 was like:
(1) I plugged in the Nexus to charge its battery.
(2) While it was charging, I enabled WiFi and entered the WEP key for my house wireless network and my Google account credentials.
(3) Over WiFi, without a sim card in it, it automatically synced my contacts from Google.
(4) I grabbed a couple of apps that I actually use from Android Market.
(5) I popped the backs off both phones, moved the sim card from one to the other…and everything just worked!
(It also took an over-the-air firmware update during this sequence. I had that as step 2, but a commenter pointed out that I must have misremembered the timing, because it would need the sim card in. I think what happened was that I remembered the update happening right after a boot, but forgot that it was the second boot – I had to pop out the battery to put the sim card in.)
This how it should be. Easy transition, mostly automatic, with the only hand-work required being things I hand-customized on the G-1. Notice what I didn’t have to do, which was throw myself on the tender mercies of my cellphone provider begging for (a) permission to change handsets, or (b) the magic keys to cross-load my contacts list and other data from the old phone to the new one.
The only thing I had to do that was even a bit mysterious was mount the Nexus’s SD as USB mass storage (which Android supports nicely) and drop my custom ringtones in Android/media/audio/ringtones, creating those directories beneath the pre-existing Android directory on the SD card. The only capability I lost was the app to manage my T-Mobile faves list (the five numbers I get free calls to) from the phone, and it turns out I can do that from my account on T-Mobile’s website…through the Nexus browser, if need be. No big deal since I’m not even allowed to change that list more than once a calendar month.
Yeah, sure, so that customized T-Mobile firmware was adding a lot of value to the G-1…not.
Which brings me to the larger topic of this post: how the balance of power between consumers and Google and the telecomms providers is changing, and what that means. Part of it is already expressed: I didn’t have to ask permission, I didn’t have to pay fees, I didn’t have to kiss a T-Mobile salesbeing’s ring…I just did it. Tremble, telecomms providers, because Android is a honey trap; it saves you truckloads on your engineering budget and dramatically improves your time to market, but it is already inexorably eroding your ability to lock in and gouge your customers.
At $529 the Nexus One is too expensive to affect the mass market directly – I couldn’t have justified buying one myself if Chris DiBona over at Google hadn’t generously opted to include me in a recent run of promotional giveaways. But it has broken the ice. Unlocked Android phones will get less expensive on a Moore’s-Law curve, and even while they’re still early-adopter toys they’re going to reshape consumer expectations about who gets to control what.
As that trend accelerates, it’s going to be interesting times out there. Consider, as a harbinger, Google’s dealings with Verizon.
We’d been hearing for months that Google and Verizon were going to do a deal on a Verizon-branded Nexus One. Then, last week, one of my spies confirmed that it was so, reporting that a friend of hers was involved in the field tests of the Verizon Nexus One. She told me “It’s crippled. The Verizon firmware is seriously inferior to the stock Google Android build.” My spy has a Google Nexus One like mine, and had seen the Verizon prototype in operation, so she was speaking from direct knowledge.
We both marveled at this. While it was certainly consistent with Verizon’s past behavior (lock in customers, then use the limitations of their handsets to hawk them stuff – like, custom ringtones because you can’t just download any old soundfile you want) it seemed to both of us like a stupid, self-destructive stunt to be pulling when the customers would have ‘pure’ Googlephones to compare the Verizon marque to.
Then, on 26 April, came word that the deal had been canceled and that Google was telling disappointed prospective customers to go buy Motorala Droids. When I heard about this, I assumed Verizon had had an attack of even more suicidal idiocy and backed out. But now it appears that, in fact, Google walked away. Verizon is now trying to pretend that it was never interested and all the hype was Google just fantasizing. But, thanks to my informant, I know better. Verizon had a prototype and Google killed it.
Here’s what I think actually happened….
Step One: Verizon latched on to the Nexus One’s new hotness for the same reason Android looks irresistible to almost every other telecoms provider in the world – huge savings in development costs, huge improvement in time to market, prospect of an app ecology adding value to it, and the open sourceness means Verizon couldn’t be locked in by a predatory upstream vendor. (As I’ve noted before, fear of the latter is the reason the telecomms outfits told Microsoft to stuff Windows Mobile up its own ass.) Note that these advantages were powerful enough to win the argument with iPhone – in fact, Verizon might very well have wanted an Android line specifically as a way of denying Apple power over them.
Step Two: Because Verizon is who it is, they proceeded to piss and shit all over Android until they liked the flavor better. And, as my informant reports, crippled it to a ludicrous degree.
Step Three: Google looked at the resulting mess and said “Not under our co-branding you don’t.” Sure, the code is open source, and Verizon could ship the prototype – but without Google’s imprimatur to divert attention from the scar tissue and holes where Verizon locked stuff down and ripped stuff out, there was no way for the product to be anything but an epic fail. There were probably other levers as well; losing Google’s engineering support would have hurt, and access to the app store might have been in play. Doesn’t matter; the point is, Google had enough leverage to abort the product launch, and they did.
The trade press is calling this a setback for Google. That is absurdly wrong, as demonstrated by the fact that Google can tell Verizon customers to go buy, instead of the cancelled Nexus One…another Android phone! Verizon is the loser here, not Google. Verizon tried to subvert Android, to flim-flam Google into propping up the walls on Verizon’s garden, and it failed.
The significance of this should not be missed. Eighteen months ago, when the G-1 was a prototype with a doubtful future, Verizon would have held the whip hand over Google; now, control of the smartphone market has shifted. You can stick a fork in the telecomms providers’ walled-garden strategy, because it’s done — and with it, all the lock-in and price gouging that they love so much. Google has served notice: it’s not going to tolerate the crippling of Android to protect anyone else’s margins, and it doesn’t have to. Because there are no realistic alternatives left, even for the exclusive iPhone provider (AT&T offers an Android phone, too).
Google has played a long game, and played it extremely well. (They can afford to; as I’ve noted before, the grand strategy around Android doesn’t rely on them making one thin dime in licensing fees.) They threw Android to the telecomms companies with barely any strings attached. They slow-balled Android’s introduction with the G-1. They knew that the economics of open-source development gave Android a bone-crushing advantage over proprietary systems, and they gave half a dozen telecomms providers time to figure that out and talk themselves into Android-centric strategic bets. They then tolerated a certain degree of initial fragmentation in order to allow their business partners the illusion that said business partners would control the pace of the roll-out, and get to selectively opt out of Android’s openness.
That illusion of control was persisting on borrowed time the day Google started selling the unlocked Nexus. Now it’s dead and in the same grave with the Verizon deal. Watch for Google to quietly but mercilessly increase the pressure on its business partners, and for updates and feature additions to effectively pass out of its’ partners’ control. Nine months from now, if you’re using any Android device later than a G-1 (which has hardware limitations that matter), you’ll be running the latest version of Android; talk of “fragmentation” will have faded like mists at sunrise. On about the same timescale, expect the cost of unlocked Android phones to drop below $200, at which point the market viability of locked phones will collapse. Telecomms providers will then lose control of the firmware entirely.
Of course, this is all good news for consumers. I started this post with a blow-by-blow description of how the G-1 and Nexus have empowered me (Yay! A phone upgrade that doesn’t feel like undergoing root canal!). This is what Google wants – frictionless phones, frictionless Web, and to commoditize all the co-factors in its advertising business. That means, as I’ve pointed out before, bludgeoning the telecomms providers into being nothing more than low-margin bit-haulers with the customer firmly in control.
It’s not just “Don’t be evil!”; as a matter of grand strategy, it’s in Google’s interest not to allow anyone else in the telecomms sector to be evil, either. And that’s good news for all of us.