Smartphones & Carriers: Who Is the Enemy?

The wireless carriers, at least Verizon and AT&T in the US, are making lots of money and growing their already massive subscriber bases. And all of them are racing to put out more and more Android phones. But the one laughing all the way to the bank is Google. 

Benchmark VC Bill Gurley offers an interesting and reverential post on Google's recent introduction of Navigation and its potentially "disruptive" effect on the navigation/GPS market. It's disruptive effect is already is evidence. But tere was what caught my eye and attention in Gurley's post in particular:

Google’s brilliance doesn’t stop there. It is hard not to have been surprised by the rapid rise in recent buzz surrounding the Google Android Smartphone OS. When I asked a mobile industry veteran why carriers were so willing to dance with Google, a company they once feared, he suggested that Google was the “lesser of two evils.” With Blackberry and iPhone grabbing more and more subs, the carriers were losing control of the customer UI, which undoubtedly represents power and future monetization opportunities. With Android, carriers could re-claim their customer “deck.” Additionally, because Google has created an open source version of Android, carriers believe they have an “out” if they part ways with Google in the future.

I then asked my friend, “so why would they ever use the Google (non open source) license version.”  Here was the big punch line – because Google will give you ad splits on search if you use that version!  That’s right; Google will pay you to use their mobile OS. I like to call this the “less than free” business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally “less than free” price point, Symbian or windows mobile would need to subsidize. Double ouch!!

 Once again:

With Blackberry and iPhone grabbing more and more subs, the carriers were losing control of the customer UI, which undoubtedly represents power and future monetization opportunities. With Android, carriers could re-claim their customer “deck.” 

This carrier perception is simply wrong wrong wrong. Although Android OEMs and carriers don't have to build or sell "Google experience" devices, that's where the competitive value and appeal of Android resides right now. 

All these Android devices put Google front and center and help build Google's brand and mobile search volumes, even as they may be helping companies such as Motorola regain its stability in the device market. 

The carriers have lost control of smartphones, never to regain it, notwithstanding all the hoopla about carrier app stores. Android is no different or a better friend to them than the iPhone or BlackBerry despite the abstract capacity to manipulate the stack and UI. Their relationship to the end user is increasingly about the monthly bill and almost nothing more.