Is Google Nexus One a threat to wireless operators?

Nexus one is the latest unlocked phone with Android operating system from Google. Before its announcement, when initial specs and information leaked there was a huge hype that it will be a game changer in the US wireless telecom industry because it is offered as unlocked. However in the first couple of weeks its sales are lagging and it is far from being a game changer.
Although I currently use and believe in the future of Android operating system, there are major obstacles in US wireless sector that would be too costly for Google to overcome in the short term. These are;

In US market operators have the control because they use different frequency bands and technologies switching is difficult and offering a phone that would work in all of the operators is both not an easy and a costly task.

Subsidization is a standard in US wireless market. That is why Nokia and Sony Ericsson have tried selling high-end devices direct to US consumers online and struggled to enter in the US market while they are highly popular in other parts of the world. They failed because consumers used to sign long term contracts and operators offer no discount in their plans in case they do not sign one which is making buying a phone from another channel meaningless.

Advertising : The reason why phone manufacturers work directly with carriers is to take advantage of their massive advertising spend. Motorola Droid is the most successful Android phone probably because of Verizon’s support.

In order to fully utilize smartphone’s all features consumers need to subscribe for a data plan. US MVNO market is very small and users have no option except going for big four operators.

I think Google is also aware of these obstacles and thinks it is a long term game. For this reason Google probably choose a divide and conquer model and favoring T-mobile. Google is collaborating with T-mobile because it is the smallest operator of four and the most aggressive one struggling to gain market share. Therefore they are the first one who launched no more plans which are offered without a contract. But their plans are still not significantly cheaper and they do not have enough cellular coverage. Moreover operators are more concerned about the threat from Web more than anyone else and it is highly unlikely that they will do anything that decreases their average revenue per user significantly in the short term.

Ugur Bozkurt