VoIP and the Commoditization of Smartphones
There are many stages in the proliferation of technology. It first starts of in the hands of a select few at an extremely high price, and then slowly filters down to the common man becoming cheaper and cheaper in the process. For a technology like VoIP to truly become ubiquitous, two things need to happen. First of all smartphones need to become so commonplace that purchasing one isn't a decision that requires a great deal of thought. Second, wireless data should become ubiquitous and extremely cost-effective. As far as the latter goes, we have seen telecom companies are starting to offer standalone data only plans at lower and lower prices. Along with the proliferation of free Wi-Fi in many business establishments and at home, there is a great deal of pressure on the carriers to keep prices low.
The smartphone market seen on the other hand is dominated by players who would like to keep the prices as high as possible. The commoditization of the PC market while great for customers hasn't made the hardware manufacturers happy. It is often a zero-sum game – what is good for us isn't good for the business. Manufacturers such as Samsung and Apple have set the bar for high-end smartphones with price tags of over $600 unlocked. They earn healthy margins on these devices and it's understandable why they would be unhappy if arrival came along and offered a similar device at a lower cost.
So it's easy to see why no one other than Google is happy with the price point of smartphones like the Nexus 4. Retailing for just under $300 for an unlocked high-end smartphone, it completely changes the rules of the game and delivers a body blow to other OEM manufacturers. LG is reportedly extremely unhappy with the fact that the Nexus 4 retails for around $200 less than its own flagship phone. Which leaves one to wonder why Google tied up with LG in the first place.
There is also evidence that LG is engaged in selling the Nexus 4 at different price points in different markets depending on how much it thinks people will be able to pay for it. Google's strategy on the one hand is to have a proliferation of low-cost high-end smartphone devices running Android. To that extent, it doesn't care about profit margins and while it may not be subsidizing the phone, it's certainly selling it close to cost. That's good for customers. Hardware manufacturers on the other hand are outraged.
The next up for Google is to build a Nexus device with Motorola. This way they can sidestep all the supply issues, produce as much as they want and as much as people demand. Hopefully this will be announced at the next Google I/O. There are already rumors after all of the new Google X phone being developed by Motorola. Will this be the year that they finally get it right?