Microsoft, Google and the Bear

What I find fascinating about the carriers clamouring to move to Android is that, yes, they're avoiding licensing fees and the cost of building their own solutions . . . but at the cost of basically eliminating all other mobile revenues other than bandwidth.

This revenue destruction will be at the hands of Google themselves and via the open nature of the Android marketplace. Google Voice kills SMS revenues today. It's free. I expect Voice to eventually include Skype-like functionality, but if it doesn't, Skype will do. It's as close to free as it needs to be. No cost for Skype to Skype calls, and 2 cents a minute to most of planet earth's landlines.

Throw in all of Google's other services that are enabled out of the box on Android (read: almost all of them) and the carrier is out of the services business altogether and is nothing but a pipe. Which is what they should be.

It's almost as if the carriers are collectively waving the white flag here (can't compete on applications and services), and since actually makes sense it leaves me wondering what the hell I'm missing?

Isn't that what made the iPhone so popular?

Then they're doing a pretty bad job.

Here's what Google is missing. Most of those non-PC owning people broadly fall into two categories: (1) those who live in 3rd world countries and/or cannot afford computers and (2) people who are just afraid of technology or have no use for it.

Selling to (2) is useless. (1) is where the money is.

Now consider a country like India. Back here, cellphones are bigger than computers, penetration-wise. Reason: a large number of competing carriers which results in dirt-cheap calls (the phone I use costs me about $7 a month since most calls I make are completely free) and affordable GPRS. MTNL and BSNL, who have a penchant for utterly destroying competitors on pricing alone, just launched dirt-cheap 3G services. I think we all know what happens next.

What is the only barrier in the way of cheap mobile Internet? The handset. To be precise, a 3G handset that is fast enough to render web pages and a few basic apps. This is where Android fails. Cheapo handsets from small manufacturers, cheap J2ME phones from LG/Samsung/Sony and Chinese clones of high-end smartphones are pretty big here. Why buy a Rs.30K Android phone when you can get similar functionality in a 10K unbranded Chinese phone? Or even a 15K HTC phone with Windows Mobile?

Unless Android can run on cheap, low-end handsets, I don't see it ever becoming big with the non-PC-owning crowd.