Washington, DC, December 29, 2009 --  

2010 is shaping up to host the biggest tech confrontation since the browser wars of the 1990s.

When Google announced this month that it will soon begin selling its own smart phone, it fired the opening shot in a revolution against the technology establishment. This revolution has nothing to do with the capabilities of the phone -- by all accounts its features will be merely on par with Apple's two-year-old iPhone -- the revolution is all about marketing. Unlike virtually every advanced phone sold in America, Google Nexus One will not be sold through an exclusive deal with a wireless carrier, but as an open device that can be used with any compatible network.¹ Google is, in effect, threatening to commoditize the wireless industry.

If successful, this revolution will be a major boon for consumers. America's wireless industry has long exploited customers with onerously long contracts, high cancellation fees, opaque pricing plans and astronomical markups for services like text-messaging. America's mobile phone carriers have succeeded in conning consumers into signing deals with the devil by offering them a free or highly subsidized phone. In the case of the iPhone, AT&T covers $450 out every phone sold², and makes the money back by overcharging users for wireless services throughout a 2-year contract.

This system ties consumers to their mobile phone providers and inhibits competitive pricing for smart phone plans. If Google succeeds in breaking down this system, then customer loyalty to carriers will go out the window and mobile phone providers will be forced to reduce the cost of their monthly plans to maintain customers. For this reason, expect big providers like AT&T and Verizon to fight Google's push to the bitter end.

But the big mobile carriers are not Google's only enemies. Google's salvo into the mobile phone market is part of a bigger push to draw consumers into cloud-based services. While the term "cloud computing" risks becoming overhyped jargon, it refers to a very real trend toward users shifting their pictures, financial records, letters and other data off of the hard drives of their machines and into a "cloud" of servers. Once a user's data resides in the cloud, it becomes much easier to access and manipulate it from any device in any location, be it a smart phone, a laptop or a traditional desktop computer. Google has long been a part of this movement, first through its Gmail service. More recently, Google directly challenged Microsoft Office with a free, web-based office suite called Google Documents.

When Google Documents was released, Microsoft didn't even flinch. But then a new class of low-cost "netbook" laptops appeared on the scene, precisely designed for internet access and the use of web-based applications like Google Documents. When netbooks exploded in popularity this year, Microsoft freaked out -- not least because early netbooks were based on the free Linux operating system. In a desperate effort to retain control of the market, Microsoft slashed the price of Windows installed on netbooks, and pressured computer manufacturers to ship these machines with Windows instead of Linux-based operating systems. This manipulation by Microsoft is probably why Google is planning to bypass PC manufacturers and sell its own Linux-based netbook directly to consumers next year.³

While Google's challenging of the old-guard is laudable -- especially when the old-guard consists of such anti-competitive monopolists as Microsoft and AT&T -- it is easy to imagine Google losing if it picks a fight with too many powerful enemies. Google's market capitalization of $196 billion is less than half that of Microsoft and AT&T combined ($278 billion and $167 billion, respectively).⁴

And these aren't the only companies that are likely to sign up for an anti-competitive, anti-cloud computing axis of evil. Cable giant Comcast (market capitalization $50 billion⁵) has sent shivers down the spine of online video afficionados with its plan to purchase NBC.⁶ The worry is that Comcast will seek to protect its cable television subscription revenue by blocking access to NBC television programs through web-based television sites like Hulu that are emerging as an internet-based alternative to cable. Although there is no imminent skirmish brewing between Google and Comcast (despite Google owning Internet video site YouTube), the cable provider is much more likely to find common cause with old-line companies like Microsoft and AT&T who are protecting established business empires against newer disruptive technologies.

Amongst the industry leaders of cloud-based web services, cooperation is hard to find. Mostly small-time players joined IBM in signing an "Open Cloud Manifesto" in March calling for transparency and data transferability in cloud services.⁷ It was no surprise when Microsoft refused to sign on, but it was disappointing when cloud computing leaders Amazon and Google refused to join as well. While IBM, Amazon and Google would seem to form a natural alliance against the anti-cloud axis of Microsoft, AT&T and Comcast, so far there has been little evidence of unity.

This lack of unity is a shame. Should Google fail in its revolution against the anti-cloud axis, consumers will suffer. Should it succeed all by itself, then consumers risk replacing these evil, anti-competitive monopolists with one monolithic company that could easily devolve into equally bad behavior.

Related Web Columns:

Slick, Easy, and Free, January 27, 2009

Waning Monopoly, April 25, 2009

Destructive Forces, June 13 ,2000

Notes:

1. Wired, Google Nexus One Phone Likely to Launch Jan. 5, December 29, 2009

2. PC World, Apple to Ink Verizon-iPhone Deal Next Year, Analyst Says, October 29, 2009

3. IB Times, Google Chrome OS-Based Netbook Tech Specs Are Out, December 27, 2009

4. Google Finance, December 29, 2009

5. Ibid.

6. New York Times, G.E. Makes It Official: NBC Will Go to Comcast, December 3, 2009

7. IT World, IBM leading 'Open Cloud Manifesto' charge, Mar 27, 2009