

Google admitting defeat in 'direct to consumer' model phone sales - bockris
http://googleblog.blogspot.com/2010/05/nexus-one-changes-in-availability.html

======
FraaJad
Google, don't lose heart. It's not you. It's just that people in US don't know
that they can buy phones in open market without signing away a chunk of income
to cell companies every month.

There are bigger, more mature markets elsewhere. Go after them. You might even
get more people to use your services (maps, etc.) on a mobile than they would
on a PC.

Also, $350-$400 (may be even $500 for topend) is a sweet spot for smart phones
in India. And people do buy these phones in open market without a contract.

All the best. Go forth and prosper.

/an iPhone and Droid owner.

~~~
RK
_Google, don't lose heart. It's not you. It's just that people in US don't
know that they can buy phones in open market without signing away a chunk of
income to cell companies every month._

As far as I know, only T-Mobile USA has really come on board so far to make
non-subsidized phones a better deal. T-Mobile has cheaper rates if you are not
on contract. If you buy the AT&T compatible Nexus One, for example, you still
pay the phone "subsidy" the entire time are using AT&T, even though you own
the phone outright.

~~~
grandalf
If you're a loyal T-Mobile customer you get to pay a loyalty tax if you want a
Nexus One compared to if you are not a T-Mobile customer.

~~~
RK
What do you mean exactly?

~~~
arantius
Honestly, it's just the way things work. It's not specific to this phone or
provider. You get a subsidized phone when you sign up a _new_ plan. It's part
of the cost of the service you're agreeing to. If you're already a customer,
in the middle of a contract, they don't "reward" you by subsidizing a phone
any time you ask for it (i.e. when a new one comes out).

When the N1 came out, however, people were for some reason surprised about
this. There's lots of news about it:
[http://www.google.com/search?q=t-mobile+%22nexus+one%22+%22n...](http://www.google.com/search?q=t-mobile+%22nexus+one%22+%22new+customer%22)

~~~
grandalf
What's the difference between me re-upping my contract for 2 years and someone
else starting a new 2 year contract?

Google seems to think the former case deserves to pay $100 more for the phone.

~~~
e1ven
If you're not outside your current contract, that's not really a very good
option. If your plan has expired, aka, you're past your initial 2 years,
that's fine.

Otherwise, you have people entering (comical) 20 year contracts, which would
be (practically) unenforceable.

------
simon_
I don't think it's likely, but I deeply hope that Google (or somebody else)
can kill the US addiction to subsidized handsets. The market will be so much
more efficient and flexible when we pay for phones as phones and pay for
service as service.

~~~
mattmaroon
It would be great but it won't happen. Humans are genetically predisposed to
wanting things that are free (even if, in reality, they only seem free).

Number portability means carriers can't offer phones at steep discounts
without the contract. People figure "I'm going to have a cell phone for the
next 2 years anyway, I might as well just pick one carrier and get it for
free."

~~~
laut
It is already reality to a certain degree outside of the US.

The difference can likely be explained by how some combination of the
economics, regulation, politics, culture, geography is different in the US.

~~~
mechanical_fish
As has been pointed out elsewhere on the thread, the fact that there are
multiple cellular radio standards in the USA (GSM and CDMA), combined with the
fact that network coverage in the USA is so spotty (my colleagues in the Bay
Area can't stop complaining about the poor AT&T coverage, whereas my AT&T
coverage north of Boston is fine) means that you effectively don't have much
choice of carrier. Once you choose a home and a phone you're very nearly stuck
with one carrier. So unless you see yourself switching your service on and off
over time, or you enjoy switching hardware more often than once every 24
months, there's no real disadvantage to signing the evil contract.

~~~
doron
I will admit first ignorance on cellular radio standard, but i'm quite sure
its possible to build a CDMA and GSM all in one phone, that are activated
based on availability and carrier.

I would love to get a droid phone that does just that.

------
lftl
There aren't a ton of details in the post, but I really hope this doesn't mean
the end of an unlocked Nexus One, or whatever Android phones will follow.

That being said, Google needed to kill this. Along with the no retail try it
before you buy it issues, Google isn't setup for being a retail company -- it
just isn't in their DNA. I mean, people had to drop $500 for a phone, and then
only support they get is a web forum, where they may or may not actually get
an answer from a Google employee? Weird confusion over whether Google or HTC
or T-Mobile was responsible for different support issues?

I'm sure Google COULD fix these things, but it would take fairly significant
internal effort.

~~~
eli
I assume it just means that Google will stop pushing it through their
webstore.

I'd be very surprised if they actually prevented you from buying the phone
unlocked. After all, you can buy pretty much all HTC smartphones unlocked
through sites like <http://www.htcphonestore.com>

------
jrockway
I think one of the problems was that the phone didn't include the radio
hardware to be truly portable. Sure, you can buy an unlocked phone, but there
is no other network you can use 3G on. So you are locked to a single carrier
anyway.

If Google released a phone that supported both AT&T and T-Mobile and Sprint
and Verizon, _then_ it would be a great deal. Hate AT&T? Just port your number
to Sprint and keep the same phone.

The phone companies would hate this, and the extra radios would cost like five
cents more, so I don't see this as ever happening. But that's what would be
truly innovative -- a $700 unlocked phone just isn't very compelling when you
have to pay the subsidy anyway.

~~~
barake
As I understand it you cannot activate unlocked phones on Sprint and Verizon.
They keep a list of serial numbers of phones meant for their networks and
generally speaking you cannot activate a Sprint phone on Verizon's network.
This isn't a problem with GSM carriers, only CDMA.

~~~
jrockway
But you can buy CDMA phones on ebay and activate them on Verizon or Sprint.
You just call them and tell them you want to do it, and since you are paying
them money, they let you.

------
TrevorBramble
On one hand I'm sad to see the attempt of opening a direct sales channel
called off. I still think it would succeed in time, as people in general
become familiar with the handsets and Android.

On the other hand, I've advised every (non-technical) person I know who is
looking into a new smartphone to go try them out in person to see how they
feel about the interfaces (along with pointing out the differences in
application availability, carriers, etc.)

~~~
anigbrowl
I think they're wise to expand into the retail space, but I'm perplexed at why
they would shut down the direct channel. I guess retailers don't want to be
mere demonstrators, losing actual sales to the online store.

I would probably have bought my N1 a month or two earlier than I did, but for
anxiety about dropping >$500 on something I had only seen pictures of...on the
upside I like having it customized with my name and email address. That
eliminates the resale value but I'm gambling that _Antiques Roadshow_ will
find it interesting in a few decades :)

~~~
johnnyb4
It's not mentioned in the article, but perhaps it has to due with the support
burden? <http://mashable.com/2010/02/09/nexus-one-live-phone-support/>

With having to deal with technical support, and all the small margins
associated with retail, I'm not surprised at Google's decision.

------
mc
They should have waited till the end of the year to make this call.

I bet there are a bunch of users who were waiting till October to buy a phone
at the discounted rate. That's 24 months after the original G1 was released,
which is when those owners are eligible for discounted upgrade.

Like myself.

~~~
jrockway
Wasn't there some issue about the Nexus One not being eligible for upgrades?
And anyway, the Nexus One is a downgrade from cheaper phones anyway; the
Incredible and Evo 4G are simply amazing and are in the same price range.

(Remember, you only pay a prorated early termination fee in the US now, so if
you only have a few months left on your contract, switching to a competitor is
cheap. I have a year left and am definitely switching from T-Mobile to Sprint
on June 4th.)

~~~
barake
The Nexus One and HTC Incredible are virtually the same phone. Just like the
European Hero/US Hero/Droid Eris are the same.

Also 'upgrading' to the Nexus One (or a number of other nice phones) on
T-Mobile requires you to switch to an Even More plan.

~~~
vetinari
Nexus One is almost identical to HTC Desire (differs in RAM amount, dual-mic
on N1 and different firmware). Both are GSM/UMTS phones.

HTC Incredible is CDMA (Verizon) phone.

------
Goronmon
So, can anyone explain why it makes sense for them to stop selling the phone
through the online store? I guess it's some combination of cost for both
storing, shipping and providing support as well?

~~~
wmf
And it annoys the carriers.

------
Rabidgremlin
They could have also sold to more countries then just the US and the UK.
What's the point of having a web accessable store front when you only sell to
a couple of countries?

------
eli
I don't get why people are blaming US consumers for the popularity of the
subsidized handset model. Of course people take the subsidies. If you're going
to pay the same monthly rate whether you get a discounted phone or buy one
outright, then why waste $200-300.

Once the rest of the US carriers follow T-Mobile's lead and let people pay
less in exchange for bringing their own phone, then a lot more people will
start going that route.

------
alain94040
Amazing failure, when you consider that they advertised the Nexus One on the
#1 most prominent web page possible: the google search form.

I'm actually surprised that it didn't work. This was top premium ad space. How
can it fail? Unless their expectations for sales were so stratospheric that
even their massive campaign couldn't pull it off?

~~~
jrockway
People don't like multi-year multi-thousand-dollar commitments, even if they
see an ad on Google.

~~~
grandalf
Correct. Google drastically overpriced the phone. As others have pointed out,
signing up for a multi year contract in exchange isn't really a bad deal
unless you wanted out of the contract sooner (and even then it's not too bad).

I had expected Google to sell the phone over the web for $99 with no contract.
That would have been the sort of bold, gutsy move that Google needs to do to
change the mobile phone market.

It seems that Google is actually looking to get a piece of the existing pie
and doesn't care about changing the way phones are sold.

~~~
orangecat
_Google drastically overpriced the phone._

The Nexus One is cheaper than a contract free (but still locked!) iPhone 3GS.
Their "mistake" was being honest about the price, and not explaining how it
would more than pay for itself in lower monthly charges if you used T-Mobile's
non-contract rates. Even that may not have worked, because consumers are
generally really bad at math.

~~~
grandalf
Perhaps. But just as Google offers gmail for free I think it would have been
possible to design a business model that allowed the phone to be sold at a
discount without a contract.

I think Google's pricing was targeted at investors (as in look, we can get top
dollar for a phone just like Apple) rather than at consumers who would happily
give Google lots of behavioral data for ads in exchange for a discounted
phone.

------
hugh3
I still don't understand why no carrier will sell me a smartphone, _any_
smartphone, on prepaid. If one were available I'd probably buy it, but damned
if I'm gonna change my 13-year prepaid-phones habit now. (Also, I don't have a
US credit rating and I kinda like it that way)

~~~
RK
You don't rent, own, or pay utilities?

~~~
hugh3
Sure, I rent and pay utilities. That doesn't affect my credit rating, which I
checked the other day and is still "no record found".

------
neovive
It's a wise move for Google and was likely planned from the outset. Google,
primarily an advertising company, was just looking for a way to generate
interest in their new mobile platform. It's unlikely that they were planning
to stay in the retail mobile phone market for the long term.

------
BrianAnderson
I think one thing to think about is how, unlike Apple, Google does not want to
upset the "apple" cart (yes, I am a literary genius). To them, removing
friction in carriers and device manufacturers from adopting Android is
critical. Given this caused some stir in the ecosystem, it makes sense to
remove the offering so they are seen as more conformist, rather than a change
agent. While change agents are good for you and me, well entrenched companies
do not really like them. Status quo is very much a preferred state of affairs!

------
known
I think Google need to pour its heart and not just technology into _direct to
consumer_ phone.

