{tech}.Ben Buckman.net

Reading jkOnTheRun's review of the Nexus One "Google phone," I think he's hit the nail on the head: the objective (or likely outcome) is to pressure the cellular providers into offering cheaper, data-only plans. (Currently getting that is nearly impossible.) Rather than offering a package of call minutes and SMS with data added as a feature, the networks need to focus primarily on data, with voice being simply one of many apps that utilizes bandwidth. And of course, Google is directly in the VoIP game now, with Google Voice and the acquisition of Gizmo.

It's remarkable how well positioned Google always seems to be. Because they're driving the curve.

If you follow me on Twitter, you might have noticed that I tried to buy a Droid at the advertised price of $200, but was unable to because I'm not "eligible for an upgrade" until August 2010 (18 months after getting my BB Storm). I googled around for tips on how to get early upgrades. Most people suggested calling over and over until Verizon gives in. But one forum post was interesting: it went something like, "what are you all complaining about, you signed a contract," arguing that the contract's 18 or 24 month wait until the next upgrade was a sacred trust and wishing to upgrade early was unethical or absurd.

Needless to say, I disagreed. I am generally of the view that Terms of Service-type contracts - in which a consumer purchases/uses a generic package or service from a provider - exist primarily to cover the provider from liability. Like credit card contracts with interest rates, there is always a clause allowing the provider to change the terms of the contract at any time. They are pages and pages of fine print laying out all the ways the provider can do this or anything else, without telling anyone, and there's nothing the customer can do about it. It's not a business contract between two co-equal parties; it's mostly just a long disclaimer.

I pay $120 per month to Verizon for my Storm service. (That's voice + SMS + data + tethering + taxes.) Verizon's network is excellent, I don't want to leave it, certainly not to AT&T, but it is an exorbitant amount of money. When I signed up for the data plan, it was supposed to be unlimited on the phone and 5GB limit for tethering. I confirmed these details with the salesperson several times. But some time between then and now, a 5 GB cap was put on the phone's data as well. If they told me, it was buried in the fine print of a PDF of a paperless bill on their site that they knew I'd never read. There was no big postcard in my mailbox telling me of the change, it just happened. I've never gone over the 5 GB limit, but if I were ever to go over, they wouldn't tell me; it would be up to me to check every day how much I've used, or pay the penalty. That's what Verizon's legal team exists to ensure: that they squeeze every possibly penny out of the customers, because notifying customers of overages would reduce penalty fees. Credit cards and banks work the same way.

So back to the upgrade-every-two-years deal. I got my Storm for $150 I believe, retail was much higher, similar to the Droid. Retail is an imaginary number, though, because no one buys cell phones at retail. So let's say for the Droid, Verizon pays the manufacturer $300, they list it at $600 retail, the customer pays Verizon $200. Wireless service is all about marginal cost: the extra load each user puts on the network is miniscule. So on a $120/month plan, Verizon's recouped its subsidy of the device in a few months at the most. Even if the margin on the plan is low, because the cost of building and running the network is so high, they wouldn't have the customer if the customer didn't have the phone, so it all has to come as a package.

Also, for early adopters, two years is a long time to use the same device, when the technology advances so quickly. For the rest of the customers, last year's BB Storm is still a decent device. Since the up-front cost of the phone is subsidized and it only works on the network, the whole arrangement is really a lease more than a purchase; the phones are effectively rented from the provider in order to use the network. So it seems to me that a trade-in system would make a lot more sense than the two-year policy. I'm happy to pay $200 for the latest device, I'm willing to give up my old device for nothing as part of the mix, I'm willing to keep paying $90 or $120/m for fast, available-anywhere, wireless broadband. That doesn't seem unreasonable to me, but it'll take a lot of customer service calls (if I'm lucky) to get it.