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.)
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 :)
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.
I'd honestly prefer it was just legislated that we do it like Europe (where you see the amount you're paying for the phone itself, and there aren't really ETFs)
An ETF is an Early Termination Fee, which you have to pay if you leave your contract early. It protects the carriers since they're subsidizing your phone.
You say that it 'protects' them, but it was only recently (last year or two) that they decided to pro-rate those fees.
So a month before my 2-year contract is up, my ETF would be the same as if I cancelled within the first month. This is bogus if the reasoning is so that the carriers can 'recoup the cost of the phone that they were subsidizing.'
Even with the pro-rated ETFs now, IIRC they won't be insignificant at the 'month before the end of a 2-year contract' point even though the carrier has obviously made back most (if not all) of their sunk costs by then...
ETFs are there because the mobile carriers like to bank your monthly fees as a constant revenue stream, and when people cancel early it screws up their numbers and projections, much in the same way that banks penalize you for closing out a CD early. Talk about how it's to 'protect the carriers from people that cancel early without covering the full cost of the phone' is just people buying in to the BS story that the US mobile industry's PR depts have been telling us for years.
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."
At that time the subscription fees did not cover the cost of the hardware. Subscription fees were also falling due to decreasing barriers of entry into dialup and internet providers. Alternatives such as advertising did not cover the cost of the net-pcs either.
For cellular phones, the $200-300 hardware cost is easily recouped over two years on a $70.00 monthly plan.
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.
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.
Give people the choice between a free phone and $60 a month or the same contract for $30 a month and no free phone, and I see no reason why many people wouldn't choose the second option. Personally I prefer to optimize my finances to minimize my monthly bills, and I'm sure I'm not the only one.
Give people the choice between a free phone and $60 a month or the same contract for $30 a month and no free phone, and I see no reason why many people wouldn't choose the second option.
That's because you have a basic understanding of math and finance, unlike an alarmingly large percentage of the population.
Apple could, but chose not to. I'm one of not just a few people who would have happily ponied up $600 for an unlocked iPhone direct from Apple, mostly because I could then use it with both my Softbank and AT&T accounts.
As is, I have to do the unlock dance, and have a phone that crashes semi-randomly. I'm very unlikely to buy another iPhone again, at least not unless they sell them as unlocked handsets, and I'm also unlikely to use it with AT&T.
Shitting on your customers is such a stupid strategy.
I actually don't see why this is so bad. There are only a handful of carriers and and I switch every 5 or 6 years at this rate. Right now I can enjoy a new phone, as I just did with a new blackberry, for free if I extend my contract, which I would do anyway. How would actually dropping $300 on my phone and then 'choosing' a new carrier help me at all? Especially when they peddle the same shit service and same shit customer support
Plans get cheaper if there isn't a phone to subsidize (at least with T-mobile.) You end up spending less money over the course of the contract if you buy the phone directly.
According to the website, the contract-less 1000 min plan costs exactly the same as my 2-yr contract with at&t's 1000 min plan. Except I got a 500 dollar phone for free.
Maybe if the discounts were much steeper and widespread, but as of now, I still don't see a reason.
Are you looking at the Even More Plus? It's not contract-less (there's a document to sign and a credit check) as much as it doesn't require you to sign a long-term contract. It's month to month. While AT&T is saying $59.99/mo for 900 minutes, T-Mobile's 1000 is $39.99/mo, the real savings comes in the data and texting plans. 1000 minutes + Unlimited Text + Unlimited data is $69.99/mo with T-Mobile, versus the gouging AT&T gives you at $109.99/mo.
I think compatibility would kill this practice. Maybe LTE can bring this?
If we could buy a phone from Europe, off Craigslist, a phone from ATT but switch to Verizon, etc., and not worry about carrier, we would start to question the contracts and pricing structure. There would be a huge demand for discounts (with the real threat of being able to take our phone elsewhere if they didn't comply) on non-subsidized phones.
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.
Very true. Google is a company with a very high revenue per employee. When I bought a N1 I had minor ordering issues and it was clearly that their support mechanisms were simply a joke -- they do that part absolutely terrible. I got much better responsiveness (and not just lame automatic email replies) when buying a $9 fan.
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
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.
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.)
The cost analyses that came out around the N1's release convinced me to go with an unlocked phone once my contract runs out. Like you, I was waiting (another year and a half to go). Although the N1 will no doubt be eclipsed by newer models at that point, I am sad to see this direct-buy option go away.
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.
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.
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).
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.
Huh? You've already received a subsidized phone if you are an existing customer so I don't see the point. If I don't want a subsidized phone, why should I pay the same rate as someone that does?
Can we expect LTE phones to work across carriers? If so, I anticipate a demand for change in the US when someone brings their out-of-contract ATT phone over to Verizon and realize they are paying as much as someone that got a subsidy.
In Germany at least there are lot's of options. I am currently on a contract with no recurring fees that can be canceled at any time. Prices for telephony and data connections are cheaper than most other contracts, too (so they don't make up for the lack of recurring fees with higher rates).
I think it's more a question of providing their usual level of mediocre, black-hole customer support, where there's no way to talk to someone about problems or issues. They fixed this about a month after launch (set up a phone line), I still have the sense that properly supporting end-users isn't in Google's DNA.
Google's support sucks, but it's not like, say, Verizon is known for prompt and friendly service. Waiting so long to set up a phone line didn't do them any favors, but it was all about post-sale support anyway. I really don't think that had a big impact on sales.
You can't go by averages. Average wages are low in India. But India also has more billionaires than UK or Germany.
The market for smart phones is pretty big in India.
(Don't have the sales numbers at hand. But Admob metrics report shows that in the first 3 months of 2010, they served 2.8 billion requests to cellphones in India. 63.1% of them were from smart phones. This doesn't mean that 2 out of 3 cell phones in India are smart phones as folks without smart phones don't usually go online much. But it does mean that the Indian market for smart phones is bigger than the Australian market - where Admob served 656 million requests in the first quarter of 2010.)
As ankeshk pointed out, average salaries may be low, but there is no dearth of well to do people in India. Also, young people spend a lot of money on mobile phones. A fancy and suitably expensive phone and a motorbike are what is a car to an american teenager.
India has unequal distribution of wealth compared to western countries. Thinking of India as a poor country is common mistake.
Google botched it from the start by offering what was effectively a carrier locked phone. Few people want to pay $500 for a phone that is only fully functional on one carrier. If Google had at least offered one GSM model compatible with both AT&T and T-Mobile 3G they could have offered some choice. Alternatively maybe they could have offered a trade-in/swap program so GSM N1 owners could switch to a CDMA N1 inexpensively. Better yet Google could have subsidized the price of the handset enough to entice people. They basically just adopted the same business model of expensive "unlocked" carrier locked phones that have failed many times in the US before. Not sure if they really expected a different result here or just wanted to jump start the Android market. If it's the later I'd say they got some successful results.
This. I'm surprised that Android phones are not being pushed more aggresively in India. There's a pretty big demographic there that is willing to throw money at good smart phones and Apple is screwing the pooch with their comically high pricing. If companies can sell unlocked androids at decent prices they could capture a piece of a very significant mobile market that is currently owned by Nokia and Sony
The problem is there were no samples in stores that people could play with.
And, if you got a lemon, you couldn't take it back and exchange it for a new model (you had to wait weeks while it was repaired by HTC (assuming N1 here)).
I really don't understand why people keep missing these two crucial points, which TRUMP ALL OTHERS.
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?
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.
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.
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.
Really Google suffered from not putting an end to those ridiculous $99 phone pre-launch rumors. It was not reasonable to expect them to sell a phone at a huge loss per device just to expand the reach of their platform.
Maybe the N1 was just an experiment for google , to learn about the mobile phone market,and to be ready in the time when unsubsidized phones are available in a reasonable price.
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.
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.
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.
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?
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.
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)
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?
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!
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.
84 comments
[ 3.8 ms ] story [ 151 ms ] threadOn 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.)
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 :)
With having to deal with technical support, and all the small margins associated with retail, I'm not surprised at Google's decision.
So a month before my 2-year contract is up, my ETF would be the same as if I cancelled within the first month. This is bogus if the reasoning is so that the carriers can 'recoup the cost of the phone that they were subsidizing.'
Even with the pro-rated ETFs now, IIRC they won't be insignificant at the 'month before the end of a 2-year contract' point even though the carrier has obviously made back most (if not all) of their sunk costs by then...
ETFs are there because the mobile carriers like to bank your monthly fees as a constant revenue stream, and when people cancel early it screws up their numbers and projections, much in the same way that banks penalize you for closing out a CD early. Talk about how it's to 'protect the carriers from people that cancel early without covering the full cost of the phone' is just people buying in to the BS story that the US mobile industry's PR depts have been telling us for years.
They didn't decide. Non-prorated fees were found to be unenforceable. I'd call that forced.
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."
For cellular phones, the $200-300 hardware cost is easily recouped over two years on a $70.00 monthly plan.
The difference can likely be explained by how some combination of the economics, regulation, politics, culture, geography is different in the US.
I would love to get a droid phone that does just that.
That's because you have a basic understanding of math and finance, unlike an alarmingly large percentage of the population.
People who are so bad at savings that they want the government to hold their money are taking the contract.
As is, I have to do the unlock dance, and have a phone that crashes semi-randomly. I'm very unlikely to buy another iPhone again, at least not unless they sell them as unlocked handsets, and I'm also unlikely to use it with AT&T.
Shitting on your customers is such a stupid strategy.
Maybe if the discounts were much steeper and widespread, but as of now, I still don't see a reason.
$20 * 24 = $480, roughly what your phone is worth except you're stuck with the carrier for 2 years.
If we could buy a phone from Europe, off Craigslist, a phone from ATT but switch to Verizon, etc., and not worry about carrier, we would start to question the contracts and pricing structure. There would be a huge demand for discounts (with the real threat of being able to take our phone elsewhere if they didn't comply) on non-subsidized phones.
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.
Very true. Google is a company with a very high revenue per employee. When I bought a N1 I had minor ordering issues and it was clearly that their support mechanisms were simply a joke -- they do that part absolutely terrible. I got much better responsiveness (and not just lame automatic email replies) when buying a $9 fan.
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
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.
(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.)
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.
HTC Incredible is CDMA (Verizon) phone.
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.
If you don't mind me asking, how/why do you use two phones?
http://justanotheriphoneblog.com/wordpress/general/woz-has-a...
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.
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...
Google seems to think the former case deserves to pay $100 more for the phone.
Otherwise, you have people entering (comical) 20 year contracts, which would be (practically) unenforceable.
Can we expect LTE phones to work across carriers? If so, I anticipate a demand for change in the US when someone brings their out-of-contract ATT phone over to Verizon and realize they are paying as much as someone that got a subsidy.
Given that the average Indian worker makes less than $6k a year, I'm not sure I'd really describe those figures as a "sweet spot".
The market for smart phones is pretty big in India.
(Don't have the sales numbers at hand. But Admob metrics report shows that in the first 3 months of 2010, they served 2.8 billion requests to cellphones in India. 63.1% of them were from smart phones. This doesn't mean that 2 out of 3 cell phones in India are smart phones as folks without smart phones don't usually go online much. But it does mean that the Indian market for smart phones is bigger than the Australian market - where Admob served 656 million requests in the first quarter of 2010.)
India has unequal distribution of wealth compared to western countries. Thinking of India as a poor country is common mistake.
And, if you got a lemon, you couldn't take it back and exchange it for a new model (you had to wait weeks while it was repaired by HTC (assuming N1 here)).
I really don't understand why people keep missing these two crucial points, which TRUMP ALL OTHERS.
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?
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.
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.
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.
Unsubsidized HTC Desire from local brick and mortar store = 400 EUR.
So I guess that the opinion 'Google drastically overpriced the phone.' is still valid.
Although, I did see a lot of Google Ads for the Nexus One.
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.
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.