Google’s Nexus One smartphone has caused several executives at mobile carriers to wonder just how far the search and Web services giant will go.
In a recent discussion at an industry conference in Spain, Vodafone CEO Vittorio Colao said the industry should be wary of Google. He cited the fact that “80 percent of the advertising online goes down one funnel” as proof that wherever Google decides to compete, it attempts to dominate and leave just scraps for the competition.
Other carriers are concerned that Google might attempt to change the way the industry sells phones and, in the end, dictate the direction of the entire mobile industry-a luxury carriers have had since the beginning.
The only problem is, beating Google to the punch will be difficult. The company has captivated consumers with several well-respected Android-based devices. It has also used its position as one of the more trusted companies in the space to change the way consumers buy phones. All the while, it has generated significant advertising revenue originating from mobile phones connecting to the Web on carriers’ networks. Those carriers are upset that they’re being left out of the money-making process. And they want Google to address that.
But the chances of Google working to help mobile carriers are slim. In fact, carriers need to stop Google before it’s too late. Here’s why:
1. Android is gaining ground
When Google first entered the mobile market, most carriers weren’t too worried. Android didn’t take off nearly as quickly as Google had hoped. Vendors failed to quickly jump on board. And Apple’s iPhone continued to dominate. But in recent months, all that has changed. Android phones are selling extremely well. Consumers are voting with their wallets and they want Android. That could cause some trouble for carriers.
2. Vendors are signing up
Following that, more vendors are signing up to offer Android-based phones after seeing how well they sell. More and more Android-based phones are hitting store shelves. The more Android phones that sit on a carrier’s shelf, the more power Google wields. That’s a problem for carriers.
3. Carriers are hated
There’s little debating that Verizon Wireless, AT&T and the others are not very well liked in the mobile space. They charge ridiculous fees on plans, their early termination charges are unacceptable and in many cases coverage fails to live up to their promises. Carriers know that. They also understand that the more they upset consumers, the easier it will be for Google to capitalize. But rather than fix their own mistakes, it seems they would prefer to target Google. Interesting.
4. Google is well-respected
The world’s view of Google is nothing like its view of carriers. Google is known as the company with the motto, “Don’t be evil.” Google offers outstanding Web search. Some of its online services are extremely easy to use. Most importantly, its Android-based phones work quite well. When given the option to trust carriers or Google, most consumers would likely choose the latter.
Carriers Covet Googles Ad Revenue
5. Advertising is Google’s domain
Google is unwilling to share the advertising revenue it generates from mobile phones. Of course, Google has no obligation to do so. But carriers believe that since Google’s customers are accessing the Web with the help of their networks, they should see a return on some of the revenue Google is able to generate in that way. It’s a tough sell. And carriers know they probably won’t get what they want.
6. The retail landscape is changing
Carriers are having a tough time with Google’s decision to sell its Nexus One smartphone on the Web. Historically, the mobile market has dictated that customers who want to buy phones need to do so at a carrier’s store or through its Website. Moreover, those carriers won’t offer an unlocked version, which would allow the customer to go to the carrier of his or her choosing. Google has. By doing so, the online giant has given users the ability to choose where they would like to take their desired phones. It’s great for those consumers, but it’s a scary prospect for carriers. Choice cuts into the mobile carrier’s bottom line.
7. Google has begun network efforts
Google plans to offer a 1G-bps network to between 50,000 and 500,000 people around the United States in the coming years. And although that network is designed to compete with networks currently being offered by ISPs, it could cause some trouble for mobile carriers as well. If Google is able to make its network profitable, it might look into other areas where it could deliver Web connections to customers. That could come to mean ubiquitous WiFi services or maybe even an alternative to current mobile services. Carriers should be deeply concerned about Google’s desire to become a network provider.
8. It doesn’t want to share
Carriers are fully aware that Google hates to share any revenue that it generates. But what they’re most concerned about is that it doesn’t want to share, in general. Their business models are based on the idea of sharing. They sell a manufacturer’s phone and then reap the revenue that phone generates in plans and other fees. In essence, the manufacturer is taken totally out of the equation after the initial sale of its devices. But Google is different. Its software generates advertising revenue that carriers can’t touch. The more money Google makes, the more power it will wield. It’s a scary proposition for carriers if they can’t find a way to get some of that revenue for themselves.
9. Google’s history repeats itself
Looking back, Google has a history of dominance. The company typically breaks into markets with something new and unique and capitalizes on every chance it gets. In many cases, that has helped it increase its influence to a point where the competition feels smothered. Carriers are worried that Google will follow the same strategy in the mobile space. They should be.
10. Time is running out
Carriers need to address their Google issues before it’s too late. The longer carriers allow Google to run roughshod over the mobile market and significantly change things up, the sooner the company will revolutionize the way that industry operates. Of course, a revolutionized mobile industry would be good for customers, but for carriers, it could be disastrous.
In the meantime, keep a close eye on Google’s interaction with mobile carriers. It should be fun to watch.