Vodafone becomes bit pipe: Locked out of retailing Nexus One!

Well then, I was waiting for confirmation about this. It’s shocking.

SHOCKIN’, I tell you!

@allaboutiphone sent me a tweet of’s coverage of this recent Nexus One story.

A few days ago I speculated that Google’s move to sell phones (“The new way to purchase a consumer phone:“) could well herald a new paradigm in the marketplace. I pointed out that the actual specification of the Nexus One wasn’t really that interesting (yes, it’s powerful, yes it’s got some cool apps) but the real meat was in their strategy of breaking the operator stranglehold on the mobile industry.

Vodafone are listed on the site as the European preferred operator. If you want the Nexus One on finance (i.e. subsidised), you need to get your service from Vodafone. Of course you can buy the device at full price and use whatever operator you wish. I wanted to know if Vodafone would get the rights to retail the Nexus One themselves?


No, no and thrice no. Vodafone will, according to the piece, have to point customers to the website to obtain their phone (and contract, if they opt to have the device subsidised).

In one stroke, Google has thus converted the mobile operator into a bit pipe, into an incidental ‘supplier’. No problem in the first instance. They’re only offering one handset and demand will be limited, in the first instance, to die hard geeks. Normobs will still obviously go to the local operator shop for service.

But what happens when Google moves to add 5 more ultra desirable phones? What happens when that range extends to 50? How will the operators react when the manufacturers, freed from the constraints of having to serve their operator overlords (“NO WiFi in that phone”, “Switch off VOIP capabilities”), can start to truly innovate and respond to market demand quickly. Right now manufacturers spend most of their time trotting round their operator customers selling them their upcoming range and making concessions as necessary — only to have to contend with the operator strategies that are sometimes totally ridiculous (See Vodafone 360). Imagine how the manufacturers will react to a portal that is retailing 50,000 devices a week to a rabid audience of consumers finally getting the devices and services they want?

I understand there’s a lot of rose-tinted future gazing going on here — and many do point out that Amazon and other suppliers have been retailing PAYG and contract phones for years. But nobody’s cut the operator out before.

We shall see. What do you reckon?

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

14 replies on “Vodafone becomes bit pipe: Locked out of retailing Nexus One!”

If a user wants an operator subsidy, they still have to sign up for a Vodafone contract. How exactly is the operator locked out?

Oh yeah, they can't sell the phone. This also means they don't have to stock it, support it, train their sales staff on it, issue replacements for defective handsets, and all the other incidental costs that come with taking on a new handset.

They still get the benefit of locking a customer into a long-term contract without having to provide any of the service that's expected in that kind of arrangement. All they have to do is keep the network running. How is that a loss for the operators, I ask you?

Interestingly, I wonder if Google will still ship the handset from the US or whether there will be a local European shipping option?

This is no different to Carphone Warehouse or Phones4U selling open market devices and adding a VF contract to get a kick back to cover (part of) the price of the device.

Google are just acting like a independent phone retailer – I'm sure other operators will also get added to this model sooner or later.

In all the coverage I've seen of the Google Nexus One *nobody* has asked whether HTC are exclusively producing the phone that Google are branding “Nexus One” to Google. Gibbering fanbois have taken over.

I bet you the same or very very similar hardware will shortly be available from HTC either SIM-free or from operators with their subsidies. Google aren't locking anyone out of anything, they're just adding a new option for consumers, and initially have a brief exclusive on this particular hardware.

I agree Euan, it could certainly be a problem for operators. But I also maintain that for Google this all about driving Android penetration – shifting power away from the operators might just be an added bonus.

Why is this different from Carphone Warehouse or Amazon retailing handsets? Those handsets don't come with a Carphone Warehouse O/S, and Carphone / Amazon don't shift enough phones to influence handset manufacturers to remove features they don't like. Now, Google owns the retail channel as well controlling the user experience (o/s and features). One effect of this might be that consumers start to realise what's possible with an unhindered Android device and won't put up with operators shackling features.

You also touched on something else I think's important about this, the mass market. I blogged about it earlier today, not sure if Disqus is going to allow links but you can get there from my Disqus profile. The smartphone market isn't actually that big when compared to the wider mobile phone market, and particularly when you are a search-based advertising company that has to chase volumes of eyeballs. I don't think it'll be as long as some might think before we start seeing Android devices aimed at the featurephone, larger volume market – and once Google gets in there the problems for operators will be many times worse.

My only proviso on all of that is whether Google can deal with the customer front end in terms of support, fulfillment etc. That stuff is far form simple.

On a different subject, perhaps I am missing something but why have the voice recognition features of the Nexus One attracted such attention? Great as a demo, and useful when handsfree or in-car, but don't we know from experience that voice activation has been on phones for ages and doesn't get used that much in reality? What's your view?

I think it is a little different. Carphone and P4U aren't massive companies with global reach and mindshare, who also have network usage agreements they could call on.

Google: Not just another independent phone retailer…

Sidenote: Will CPW become an MVNO at some point?

Could not agree more here. How is this any different to Apple stores selling the iPhone on contract?

It's all about building an ecology (Voda 360, VodaPhone Live, My3, Orange World, iTunes, App shop etc) around and into the phone, for which control of device customisation is required.

Both Apple and Google have managed to secure a controlled environment that now gives them full control to embed their services without interference from operators.

There is also an upside for carriers from Google : Google will provide customer support for Android devices. that means no training for the “Store Guys”, and that'll save Vodafone money.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.