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Google Prepares for Major Mobile Disruption

Monday, 4 Jan 2010 | 10:57 AM ET
Google Android
Google Android
Google Android

The secrecy surrounding Google's Android event tomorrow reminds me of the build-up for an Apple event.

And while Apple has the whole "event" thing down, the pressure is now on Google to deliver.

And big, especially with a stock soaring as the New Year of trading gets underway.

Merely unveiling the Nexus One, the oft-rumored Google-designed and Google-branded smart phone won't be enough at this point. The hype that Google is in part fueling demands much more. And that's where pricing comes in.

Sure the phone promises to be intuitive, and slick, and sleek, and app capable, and cool. Maybe Google unveils some kind of open-access online digital media store linked to the device, ala iTunes. But for this phone to be truly disruptive, it'll need to be exceptionally low-priced, and unlocked.

How to do that? Instead of carrier subsidies so common in the industry that allow for $300 devices to sell at $49 as long as consumers sign ridiculously Draconian carrier contracts, Google itself needs to become the subsidizer. Heaven knows the company can afford to do this, with billions stashed in the bank. Most experts believe Google put that money aside to launch an ambitious acquisition strategy. This mobile subsidy would fit nicely into that plan, using the money to acquire mobile eyeballs as Google tries to dramatically expand the mobile advertising marketplace.

And carriers will love the idea too, since they'll no longer be on the hook for those costly subsidies, and still reap the rewards from all that increased data usage and corresponding data charges.

If Google goes this route, and offers its own subsidized handset — and consumers buy into the idea (and why wouldn't they?), this could turn the mobile market on its ear. Handset makers and content creators will wield and exert real power, and the networks and carriers get relegated to the back seat.

Google could even go so far as to include free Wi-fi in every one of those handsets, reducing the carrier dependence even more.

Very few companies are in a position to answer Google's strategy, if this is the route the company takes tomorrow. In fact, I can think of only one: Apple.

Imagine for a second that 6 months from now — or sooner, Apple unveils a CDMA version of iPhone, allowing consumers to buy an unlocked phone and choose their own network. Apple would need to heavily subsidize the iPhone's price tag, and what the company doesn't enjoy in reaped mobile advertising eyeballs like Google's strategy, it would enjoy big-time rewards from expanding the Mac/iTunes/App Store ecosystem. Apple blew it by not opening up the Mac platform to the broader market early on. With App Store, it seems determined not to make the same mistake twice. Releasing an unlocked and subsidized iPhone would accelerate Apple's penetration even more than it already has seen.

It's fun to dream. Meantime, you gotta walk before you can run. Let's see what Google does, and what the market does. Google might be doing Apple's market research for it. Beginning tomorrow.

Google needs to think outside the box, or risk getting boxed in.

  • Slideshow: Evolution of Wireless Communication

Questions? Comments? TechCheck@cnbc.com

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