Google's Biggest Phone Move: Disrupting Carriers By Selling Direct To You

Google Phone Dream

Google’s biggest, most important announcement today isn’t the Nexus One smartphone’s feature set, specifications, or which carrier networks it will work on. It’s Google’s business model that matters.

Specifically, it’s that Google — not your local phone store — is going to be the place you buy the phone from. That is, as we first predicted last month, the real, big change from the old Android model to today.

In December, we laid out a vision for what a potential Google Phone purchase might be like someday, including buying a phone directly from Google, turning the phone on, and then picking which carrier you’d like to work with. (The carriers could try to woo you at this point with special subsidies, deals, promotions, etc.)

That’s the mockup illustration you see above, from our post in December.

Google’s new Nexus One phone store isn’t quite as futuristic, but it’s close. As the screenshot below shows, you pick your phone first — the Nexus One for now, but more devices coming in the future, Google promises — and then you pick your carrier.

Today, it’s available to work with tiny T-Mobile in the States. Coming soon, Verizon Wireless, the biggest U.S. carrier, and giant Vodafone in Europe.

The big change — and the whole point — is that Google, not the carrier, is now the distributor. The carrier simply offers voice and data service.

Nexus One Store

How this helps Google is that it gets to market and sell phones to you in a marketplace without competitors — no iPhones, BlackBerries, or Palm Pres here — and gives carriers and incentive to compete over you, the customer.

In a typical mobile phone store, it’s exactly the opposite. You’ve picked your carrier for whatever reason — under contract, store location, nice carpeting — and then you have to pick between phones.

It’s much easier for Google to seal the deal this way. (Bonus: It probably gets a few hundred bucks for helping sign up mobile subscribers, the way any third-party retailer — Amazon, RadioShack, Best Buy, etc. — does.)

Eventually, Google could get even wilder with this storefront, mixing and matching service from multiple carriers, offering data-only subscriptions and subsidies, and even its own Google Voice phone service over VoIP.

We wouldn’t be surprised if more options like that started to show up in due time. But today, it’s much simpler, to give people a chance to switch to the new model.

Google is not the first to try selling phones direct to consumers. Apple, of course, sells many of the iPhones in the U.S. via its retail stores. Palm has sold unlocked phones direct to consumers for years (at steep, unsubsidized pricing) with limited success. Nokia does this with some phones that don’t make it to the U.S. at major carriers.

It’ll take a while before Google is able to sell a lot of phones this way. People are slow habit-breakers, and most potential Nexus One buyers are under contract with non-T-Mobile carriers right now. This is why you see people like Motorola co-CEO Sanjay Jha saying things like Google’s new storefront aren’t a “threat.” (We assume some Motorola products could make it onto this store sooner than later, anyway.)

But it’s a smart, potentially disruptive move on Google’s part, even if it makes some of its partners mad. Someone needs to shake up the carrier-dominated distribution model.

And of anyone in the industry, Google has the least to lose — and among the most to gain.

Bonus: Photos from today’s Nexus One launch

Illustration by Dan Frommer, photo by Cory O’Brien

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