Gavan Reilly's Portfolio writings, ramblings, mumblings

To the Nexus level

The launch of Google’s first phone isn’t huge in itself, writes Gavan Reilly, but its implications for the business of mobile phones could be huge

Though it was no surprise when it was finally launched in the first week of January, the arrival of Google’s first phone – the geekily titled Nexus One – sent enormous ripples throughout both the telecoms and internet industries.

While the search company were flatly denying the existence of the handset in advance of its understated press launch, the existence of the phone had become Silicon Valley’s worst kept secret since photographs of the device – which had been given to some Google employees – were posted on Twitter in the weeks before Christmas.

From a features point of view, there is actually quite little of significance about the Nexus One; it is certainly not much more advanced than the iPhone in terms of ability (though the use of Google’s own open-source Android operating system means that there are more sources of applications than just the iTunes Store). Sure, the Nexus One has a much-trumpeted Snapdragon chipset – a new technology meaning that the phone can work at speed without using much battery power – but its default applications, weight and touchscreen are not particularly unique or game-changing.

There are two game-changing things about the Nexus One, however. Firstly, in a major break from the traditional sales model in most developed countries, the Nexus One is being sold directly by the manufacturer (in this case Google, though the phone is actually being manufactured in Taiwan by HTC) through its own store, and without a SIM lock – thus allowing the owner to use any SIM card they wish in the device, without needing to get the phone unlocked for a tenner in a dodgy electrical shop on Camden Street. People who want to use the phone with, say, their existing pay-as-you-go SIM card will be free to do so, regardless of their phone network.

This is a significant shift from the traditional sales system. As most people will be aware, ordinarily when users buy a mobile phone it is heavily subsidised by the phone network selling it – thus barring the owner from using the phone, their own property, on another mobile network.

This has always been an ethically dubious practice and has been legally challenged in many countries, most notably in Singapore where SIM locking as a practice has been totally outlawed. While the Nexus One carries a hefty price tag for the SIM-free model – $529, or about €370 – it still compares more than favourably to buying, say, a 16GB iPhone 3Gs from o2 in Ireland, where the pay-as-you-go option will set you back €519 and still leave you with a phone that cannot be used on any other network.

If this direct sales model catches on – and early indications from the US and UK where the phone is currently available for direct despatch would suggest that it will – then more established manufacturers like Nokia and Motorola may have to dramatically rethink their sales models, and abandoned the hitherto dependable practice of allowing networks to resell the phones.

The second epoch-defining aspect of the Nexus One is that Google, in being the first major web services company to launch their own hardware, allows users to flawlessly synchronise data from their Google accounts (including the evergreen Gmail service as well as the Calendar and Docs applications) to their phones. Previously, companies like Google or Facebook would have had to custom-write their own software for use on other phones in order to allow users access these services. Now, users’ phones will do all this work for them – cutting finally the umbilical cord of privacy and keeping the owner within reach of the web at all times.

It’s through this practice that the Nexus One is likely to become a cash cow. Google’s money is made by its advanced techniques of targeted advertising, which appear everywhere from a Google search result to a page on Google Maps. By essentially allowing Google full and unrestricted access to their personal data, users will be giving Google an unparalleled representation of their lifestyles (the nature of their messages, the demographics of their friends, and so on), allowing Google to further hone its advertising techniques and muscle its competitors even further out of the market.

Time will tell if the world’s first ‘superphone’ (‘smartphone’ doesn’t cut it any more, evidently) will redefine how mobile users approach online services, but it will certainly leave an enormous impact on the traditional method of selling mobile phones.