Experts question Google phone business model

When Google introduced its Nexus One phone in January, it unveiled a whole new business model in the mobile phone market. But it has become clear that the business model is based on a vision that isn't currently possible in the U.S., experts say.

"Google was initially saying it wanted the Nexus One not to be tied to an operator, to be open and free for anyone to buy it and use it," said Allen Nogee, an analyst with In-Stat. "It seems like a great philosophy. The problem is in the U.S. the operators have built a web in such a way that's impossible to do." Google's recent response to the U.S. Federal Communications Commissions' questions about early termination fees points to the disconnect between Google's vision for its phone business and the current reality of the mobile business, Nogee and other experts say. In a letter to the FCC, Google describes its new business model. "Simply put, empowering consumers to pair a mobile device such as the Nexus One - and additional devices in the future - with the users' choice of operator and service options is a new model for selling mobile devices in the United States, one that we believe will maximize consumer benefits," Google wrote in the filing. But unless Google plans to offer essentially a universal phone, it will be doing nothing different than the many third party phone retailers in the U.S. that already sell a variety of phones that are tied to a specific operator.