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Will The Google Nexus One Change The Way We Buy Cell Phones?

By Erik Folgate


Ever since cell phones became popular and now to the point that you look at someone like they are an alien if they don’t have a cell phone, they have been sold exclusively with cell phone service providers. It was a marketing strategy that gave cell phone carriers an incentive to force customers into signing up for 1 or 2 year contracts. The cell phone is like a printer. The printer manufacturer doesn’t give a crap about the sale of the printer, they want to hook you onto buying ink from them for the rest of your life. So, you could buy the cell phone for really cheap or even free with a contract or if you didn’t want a contract, the phone would still be locked for that specific carrier and you paid a crap load of money for it.

The Google Nexus One could change that scenario. It will be offered by Verizon for $179 with a 2 year contract, but you can also purchase it from Google for $529 unlocked. NO contracts, and you can use it with any carrier you want. For the first time, you can choose the phone you want with the service you want. The Wall Street Journal wrote about this, hoping that the Google Nexus would be the first step to cell phone providers becoming more competitive with their service plans.

By selling the Nexus One unlocked, Google gives its new phone at least one strong plus against the Apple iPhone, which is sold locked to AT&T’s network. You’ll still need to pay to use the phone, obviously — but at least you can pick your network.

Who can benefit from this immediately?

Among the obvious beneficiaries: Anyone who travels abroad. If you have a locked phone, you may end up paying rip-off roaming fees. With an unlocked phone you can just switch SIM cards and use a local carrier. The savings are not trivial. I do this whenever I travel to Europe, and it can save me hundreds of dollars each time.

The article also points out that, obviously, you can buy unlocked phones right now but they are often used or refurbished and sometimes unlocking the phone voids manufacturing warranties. I know that if you jailbreak the iPhone and Apple finds out that you did it, they’ll flag your serial number and void your 1 year Apple Care warranty.

I am all for increased competition, and as an iPhone owner with AT&T service (which I hate), I hope that the Nexus does well, because I think it will be good for changing the landscape of how we do business with cell phone providers.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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Comments

  • http://personalfinancejourney.com Lakita

    Sounds great, but…who is going to pay Google $500 for a phone???

    Maybe I’m in the minority, but I’d rather by a phone I want at a contracted price. I’m not loyal to any of the phone service providers…I go with who has the best deal.

    For example, I switched to US Cellular for the free “call me” minutes…before everyone else offered free incoming. Since then, Sprint came out with a “simply everything” plan that works for me. So I switched. Once I decide on the service provider…then I will decide on the phone. I’m happy with the Palm Pre, though admittedly, if Sprint carried the iPhone I would probably take a closer look at it.

    Kita

    • Erik Folgate

      I agree that the $500 price tag is a lot, but imagine not being stuck with one carrier for 2 years. You could hop from one provider to another based on who comes out with the cheapest plan. I know people don’t like ponying up all of that money right up front, but being able to avoid a long-term contract could be worth the up-front money.

  • Nancy

    It sounds like the Nexus might be the next big thing! It would be wonderful to independently buy the exact phone you want and not be stuck with a particular long-term contract! Way to go Google!

  • Karmella

    I would *love* to see cell phone providers become more competitive. I was with Verizon for literally 15 years and kept holding off on the iPhone – I finally gave in and as much as I *hate* AT&T I wouldn’t go back. If I could have the phone I want on the network I want – ah, that would be nice.

    The whole cell phone industry makes me vaguely angry – but being able to keep my phone number was so important to me that having that makes me at least feel a little less constrained.

  • Tabatha

    Along these lines, how about allowing customers to customize their plan? I wouldn’t mind a 2 year contract as much if it gave me only what I wanted at a price I felt was reasonable.

  • Mike

    I would love being able to find a good phone, pay more for a phone that I will keep for a while, and pay less each month for the service. I hope this phone does change cell phones.

  • http://earngivesave.com Andrew @ Earn Give Save

    Although I am a diehard iPhone user and don’t know what I’d do without it, I do love the fact that Google has a cell phone storefront now. Hardware providers should have more control over use of their phones, and Google’s announcement of the Nexus One seems to indicate a movement towards balance between manufacturer/marketer and carrier.

  • Kendra

    Sounds great. I’ve been hearing alot about the Nexus. But I’m with Lakita, $500 for a phone is steep.

  • http://www.weseed.com Joel

    To me, Apple is almost becoming like Microsoft: the 800-pound gorilla (in the cellphone world, at least). For ages, Apple was the young, cool upstart, and owning one of their products meant you were a little rebellious, a little off the beaten path. Now, the iPhone seems like the standard, and it’s locked into this draconian deal with AT&T (definitely NOT cool). So phones that don’t have that AT&T albatross are seen as being cooler. I wonder how Apple will respond…

  • Gina

    My cell phone is supplied by my employer. I may consider an additional cell phone for personal use if it was more reasonably priced. $500 is too much for what would be a ‘toy’ for me. I doubt my employer would consider given the price tag…

  • Linda

    You have to consider that that $500 is incorporated into every monthly bill- I think that I’d much rather save up for a one-time rate and pay a smaller bill every four weeks- plus, no contract!

  • http://www.artificialrobot.com Sean

    This sounds great in theory, but in reality an unlocked phone doesn’t get you a whole lot. If you buy the verizon unlocked version of the phone then you are locked in to using Verizon’s network because they use a CDMA network and no one else does (maybe Sprint, but who wants to use Sprint’s network). If you buy the T-Mobile version of the phone then you *can* use AT&T’s network, but you won’t be able to use their 3G, you’ll be stuck with edge, because T-Mobile and AT&T use different versions of 3G.

    It is possible that as we go forward more phone manufacturers will use dual band chips and maybe that is google’s plan, but until I see that, an unlocked phone just doesn’t entice me that much. I’d rather get the discount.

  • Audrey

    I like that they’re offering the phone unlocked, but hope that the price will come way down. Even though I don’t like phone contracts, I can’t see spending $500 on any phone.

  • Jesson

    Looks like Verizon will not carry the nexus one until Spring 2010 for the 2 year contract. T-mobile will be the only carrier supporting the discounted phone with a 2-year contract. $529 seems high for a phone, but people are applying for 79% credit cards…

  • Mac

    I don’t think it will change the landscape very much as only the diehard Android fanboys will pay the full price in this country. Too many people have the mindset that phones only cost between $30-$200…few consider that they are paying the full price over the term of their contract.

  • Winston

    %529 is high for a lot of people. I heard it costs Google less than $200 to make it. Despite the hype about Nexus One, the only option (Of course At%t is the devil that everybody is trying to switch) is T-mobile because it uses GSM network. And for those who plan on buying Nexus One, good luck at calling customer service. It seems right that that none of the three involved (Google, HTC and T-mobile) will help your with your phone problems. That’s what I heard.

  • Audra

    I’m an iPhone owner too (oh how I love you iPhone…kiss kiss kiss). I’m also stuck to the AT&T plan. I HATE AT&T! Let me repeat that…I HATE AT&T. That has got to be the worst customer service on the planet. I’m not talking about how good their reception is, or how well you can connect…I’m talking about how they treat their customers. I spent over an hour one day on the phone with “customer service” with a crying baby in the background, trying to get a woman to turn off my home phone. She kept trying to talk me out of it and I wanted it turned off. I was on the verge of tears. I would actually consider switching to a different type of phone, just to avoid AT&T. Did you hear that Apple? I love you Apple, I love you like a bee loves flowers, but if you don’t get away from AT&T, I’m outta here. Whew, sorry for that vent. Thanks for the read if you made it this far. So yes…in point…I am all for changing the way we buy cell phones. :-)

  • Kimberly

    I too always wanted an IPhone, but years of dealing with AT&T and a contract that never seemed to fit me. I decided to start shopping around and I found something that fit me in terms or product and service. I switched over to Walmart’s Straight Talk prepaid cell company and I couldn’t be happier. I was able to purchase the Samsung Finesse (a more affordable Smart Phone) and it has many of the same functions and abilities as the IPhone. Best of all, I’m saving money with Straight Talk’s Unlimited plan (data, texts, calling) – it’s only $45 a month and that is nearly $50 less than it would cost me AT&T with a basic IPhone plan. What’s also great is being on the Verizon network via Straight Talk – my calls haven’t dropped yet. I never thought a prepaid company would be able to offer me such a great deal with such great service, but Straight Talk does just that. I’ve just moved out so Straight Talk is helping me save money and still have a cool, new Smart Phone with no contract issues or potential overage fees.

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