June 25, 2008

Google’s Android: Why cell phone companies must embrace their dumb pipe future

Revolutionary changes are coming to the phone market. The cracks started appearing last year with Apple’s iPhone and its ability to provide full web browsing and a UI that doesn’t frustrate the handset owner. The iPhone has started a movement, but Google’s Android platform, as profiled in an excellent article by Wired, is going to completely change the industry.

Android works not by creating a singular “iPhone killer”, but by allowing the market to have access to an excellent open-source OS that will run on all kinds of cell phones. Companies can then write programs to take advantage of the unique features of an internet-connected smart phone, such as GPS social-networking app Commandro.

Android cuts into the current walled garden cell phone model, where the wireless companies try to keep you locked in based on their own unique features. They limit what applications can run on their networks, and force customers into buying crappy two minute videos and ringtones on their network’s proprietary systems.

The cell phone companies will have to change this model, though, because customers are beginning to get fed up. Expensive plans, obnoxious customer service, and cumbersome features plague the cell phone market. The industry has one of the lowest customer satisfaction rates and is one of the most complained-about industries according to the Better Business Bureau.

Customers want to be able to read web pages, check email, watch video clips, and listen to music, but they don’t want to have to go through Verizon’s or AT&T’s watered-down access points. Sure, they will put up with these inferior versions for a while as a means to an end, but once an open-access alternative is available, the customers will flock towards it. The smaller wireless providers, such as T-Mobile and Sprint, are already moving in this direction. Verizon and AT&T need to see the benefits to Android before it is too late.

If the cell phone market should be opened up as I am suggesting, how should the wireless companies compete? By what they advertise: their networks. This is referred to as dumb pipe, where the operator’s network does not add value beyond bandwidth and network speed. However, I believe that this is an opportunity, for a wireless provider could worry about the two most important features to the customer - wireless network and physical handset - and let the market worry about the rest.

There is plenty room for differentiation in terms of creating a great cell phone design and coupling it with greater access reliability. And even with Android, the companies could still design their own applications for downloading content. These apps would even improve, because they would actually have to compete with the open market. In addition, the wireless providers could strike deals with Google to receive percentages of Google’s advertising dollars for allowing Android onto their networks.

Android is poised to shake up the cell phone market in a very positive way for the consumer. We shall see if Verizon or AT&T jump on board before it becomes too late.