11:52 AM

Analysis: GOOG Needs To Have Its Own Telco Service More Than It Needs A Phone...

With all the fuss around Google's Nexus One phone I was reminded of the words of @shitmydadsays:

"Son, no one gives a shit about all the things your cell phone does. You didn't invent it you just bought it. Anyone can do that."

Anyone can spec out a phone and have it manufactured. Google needs more than a phone, it needs the network it runs on. That's because Telcos have total control over what features and services they will allow. A phone is nothing without the network.

Google needs its own wireless Telco business because otherwise it risks being blocked from the mobile Internet -- the fastest growing ecommerce sector.

What good is a Google phone if you don't have any control over the applications and services that run across the network?

Google risks being cut out of mobile search services on mobile platforms, or being positioned a click or two away because of future business decisions made by a Telco. And on a mobile phone, if you are a click or two away, you might as well be in Siberia. Net neutrality laws won't protect you from such a scenario.

Telcos block innovation

The Nexus phone does nothing to challenge the power of the Telcos.

The Telcos have invested heavily in technologies such as VOIP and faster data networks and have brought down their costs of operations tremendously, yet the cost of mobile plans hasn't gone down, it continues to rise.

The Telcos have the government on their side, it is a regulated industry, and one that brings in huge amounts of money to state and federal government agencies — take a look at your monthly bill and see the dozen or more taxes and fees. This relationship between government agencies and the Telcos helps keep out competition and keep monthly fees high.

Yet wireless data communications lies at the heart of many innovative products and services being developed by Silicon Valley companies.

The Telcos are holding back innovation because they control who is allowed to offer applications and services.

- They regularly block innovative features within cell phones.

- And the high cost of their monthly plans has created a digital divide far greater than the one on the desktop.

It is important to bring real competition into the wireless space to bring down costs, to bridge the digital divide, and to ensure that Google and tens of thousands of other companies can offer their applications and services on an even playing field.

A Google phone won't do it.

If Google acquired a Telco it would own its own network and it would also own a billing relationship with millions of customers. It could then introduce new services knowing that it couldn't be blocked. It could also ensure that its partners and application developers would have open access. It would become a true platform.

If it doesn't do this it risks being blocked by a Telco that decides it is a competitor.

A phone is nothing without the network.