Friday, May 14, 2010

Google Giving Up on Selling Nexus One Direct

I never fully understood that move in the first place. There was a lot of talk about phones from carriers and plans--like they do with un-locked phones in Europe. That seems noble, and in many ways it could be good--cross-subsidies often mask inefficiencies. But, but, but...

First, it just seems too much like competing with your distribution channel. That's never a good thing--where would Android be without the relentless Verizon campaign for the "Droid"?? Second, T-Mobile, Google's closest Android ally, had already taken the step of offering the "Even More Plus" plans, that offer lower rates but no subsidized phones. Third, my comments about cross-subsidies aside, if you really want a new phone, it is often net short-term cheaper to get the subsidy[1]. Fourth, why in the world would it be available with only one very specific plan?! Probably in some way tied to the arms-length arrangement with Google (I'm not sure exactly how, but that is the only theory I can muster), but from a consumer point of view, what a colossal fail. 4 strikes, give up the game.

[1] I think cross-subsidies are distortive in two ways. One, they may save you money in the short-term, but they lock you in to the carrier for 2 years. Two, in some cases they may cause people to upgrade just because they can: spending $50 to get a new phone that retails for $200, when they never would have shelled out $200 for a new phone. That is clearly an economic inefficiency.

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