Sticky Smartphone

Posts tagged android

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Why it doesn’t make sense for Google to be a carrier

In 2008, Google bid in spectrum auctions in the US prompting speculation that they wanted to become a carrier, actually this was focused to unlock open-access rules which allows any device or application to connect to the spectrum used by the carrier, effectively enabling OTT applications (Google voice, Skype, Whatsapp etc. However, rumours and speculation have continued to be persistent about Google becoming a carrier. Here are some reasons why it doesn’t make sense for Google to be a carrier

1) Current Carriers Hate Competition

The idea that Google might enter the carrier ring would make current carriers think twice about subsidizing Android devices, why subsidize the competition’s devices? You don’t see vodafone branded devices on other carriers. Carriers won’t take kindly to Google encroaching on their turf. Carriers still have some power in making or breaking devices. One of the reasons for the fall of Nokia could arguably be because carriers refused to take their devices and promote them because they remain one of the main sales distribution channels for phones.

2) International view

If Google were to successfully gain spectrum in the US, the rest of the world would instantly stand up and notice. Will Google try something similar in the future in different countries? This would lead to an Android ‘backlash’ as more and more carriers restrict sales channels

3) Hardware sales is not Google core

Google would have to sell their Android devices through their own stores. Google just don;t have the DNA to do this. It would take time before they can do this effectively. They could try online sales, but the failure of the original Nexus when it was boycotted by most of the carriers demonstrated how physical sales channels still dominate when it comes to phones. Android has gained traction now, so there may be more success via online only sales, but most people still like to physically compare phones unless they have already have made their purchasing decision. This would still affect effectiveness of sales.

4) Customer Support

Ever tried getting customer support from Google? There’s no easy direct way to contact them. Support for the Nexus was terrible, providing only email and forums. Supporting customers with their carrier issues is on another scale, and something that Google has never experienced.

5) Infrastructure

Owning spectrum is one thing, building out the infrastructure to support an entire country is another, and it would take a lot of money and time to build out a decent network. Sure, they could be a MVNO to begin with, but i wouldn’t bet on many other carriers wanting to help Google unless they were required to by the FCC. Secondarily, Google is a software company and not experience in the rollout and upgrades of network infrastructure to the scale that AT&T, Verizon and T-Mobile have.

6) What are the advantages?

There are very few benefits for Google. The main one is the customer relationship. Rather than sharing that with the carrier, it would give google direct ownership of the customer, which means they can better lock people into their ecosystem creating hurdles for people to switch out, effectively creating a switching cost that many people won’t bother with. However, the costs and lack of expertise is likely to cost them more than the benefit gained from running this type of strategy.

Given the above, it just doesn’t make sense for Google to traverse down the carrier route. They would be better off utilising their market power with Android as a negotiating tool with carriers.

(Photo credit wallshq.com)

Filed under google carrier android nexus

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Android and Apple have NOT won the smartphone war.

Techcrunch made this claim (for the US market), but it’s far too early to call and history tells us that mobile and PC industries are not the same. Android and iOS has only been around a few years and has been swinging around wildly in its young history. If we look at mobile market share for the ‘top end’ in the past 20 years, there has probably been 5 different dominant OS’s/Manufacturers.

Motorola -> Palm -> Blackberry -> Apple -> Android

In the USA, Motorola dominated early on and then the ‘advanced’ phones marched in. By 2004 Palm were the dominant smartphone platform.

Fast forward 3 more years to 2007 and Blackberry take the US title.

The iPhone was introduced in 2007 and took 2 years to take the mantle, by September 2010 it was number 1 in the USA

Currently, it’s Android, which assumed the position in early 2011

The current incumbents (Apple & Android) are less than 5 years old! There is still plenty of time for change, and change has been happening fast. That’s an average of just over 4 years for each incumbent, but the trend suggests change is happening faster.  

Apps make them sticky

"It’s all about the apps". Actually, apps are only a part of the equation and having an ‘ecosystem’ worked well in the PC industry… This isn’t the PC industry. There’s a few examples and reasons why apps aare not the killer feature that makes a platform sticky as well as some other strategic factors.

Game Consoles are a prime example of people abandoning platforms, upgrading to a new one and buying a bunch of new games (apps). The next cycle of gaming consoles is coming soon, that means another new sales cycle of new games and apps.

Developers will always be looking for ways for recurring revenue, and upgrading or changing an ecosystem is a good way to generate sales. As the platforms evolve, developers want to tie in users to their system in much the same way that platforms want to control their users. Apps is the platform way, facebook do it via their social graph. The larger developers will want to evolve a way to wrestle some control over ‘its’ users, potential methods include web apps, although they are still not mature enough for mobile because  ‘native apps’ perform better, but it gives users a lower hurdle to ‘switch’ platforms when it is ready.

Carriers do not want a single ecosystem in control. As soon as this happens, all the revenue will be taken away from them because they will lose bargaining power if everyone demands the same device. It’s in their interest to promote competition and they do this with their subsidies. They are the biggest difference between the PC industry and the mobile industry because they act as the gatekeeper to your wireless service. They can and will help swing platform battles. Nokia failed with Symbian in the USA… how many Nokia smartphones were subsidised by US carriers? 

Manufacturers do not want to be owned by a platform that they have no control over. If a platform dominates, then the profits will be extracted out at the platform level, they lose loyalty towards their brand. Nokia abandoned Symbian and Meego, yet they still announce that they will work on Meltelmi. Samsung are working on Bada and now Tizen. In China there is Tapas, OMS. They also do not want to be controlled by the carrier,  a prime example is the amount of control that Docomo have over Japanese manufacturers, they set the specifications, the standards and take most of the profits.

There are far too many layers battling over control that it does not become a consumer choice. Strategic alliances and enemies are created all the time. The original formation of Symbian was a strategic alliance against Microsoft. The split of Symbian and move to Android was a strategic move away from the control of Nokia (major Symbian shareholder).

The smartphone war has not ended.. it’s still in its early stages. 

Filed under smartphone android apple iphone nokia motorola symbian