Google Irons Out Its Nexus One Strategy

Google is moving quickly to get beyond its bumpy start as a mobile device retailer, dealing with some of the complaints around its Nexus One smartphone.

Google (NASDAQ: GOOG) entered the smartphone market in January with the launch of the Nexus One, an HTC-built phone running the search giant's open source Android operating system and sold directly to consumers online. Almost immediately, however, Google ran into a few snags.

There were complaints about the high cost for T-Mobile subscribers -- Google's only carrier partner for the device -- who wanted to switch from their current phone to a Nexus One, with some complaining that the early termination fees (ETFs) were exorbitant. And early users also complained about spotty 3G coverage.

Google has already issued an over-the-air patch to deal with the 3G problems.

Now it has set up a toll-free line to handle customer service calls and, in the wake of an investigation by the FCC's recently-formed Consumer Task Force, has slashed the ETF and transfer fees.

Google's "equipment recovery fee" -- as it calls its ETF -- is for customers who break their two-year contract with T-Mobile after a 14-day trial period but before 120 days have elapsed. The fees have been slashed from $350 to $150, while the cost for existing T-Mobile customers that want to upgrade to the Google phone has been slashed from $250 to $50. There is a separate ETF charged by T-Mobile, typical of most carriers, that remains in place. 

As to the support issues, Google has broken with tradition of doing all its support online and added a toll-free number specifically for Nexus One customers. Live customer support is available through 888-48-NEXUS (486-3987). The line is open from 7 AM to 10 PM EST.

Such a move was not unexpected. Eagle-eyed Android and Nexus One users had noticed a job posting at Google for a Phone Support Program Manager.

Google acknowledged the nudge from the FCC on the ETF price cuts. "We'd been in talks with T-Mobile before we received any interest from the FCC, although the [FCC's inquiry letter on the ETF] did help the process along," a spokesman for Google told InternetNews.com.

As for the support system change, the spokesperson said it comes as an enhancement to an already-successful support program as Google continues learning the ropes.

"By design, we focused initially on providing the best possible customer support through our online channel, and our experience in the four weeks since the Nexus One launch enabled us to significantly enhance that online support offering," the spokespeson said. "We have been able to address a large majority of customers' inquiries successfully through online support, in combination with phone support from our partners, HTC and T-Mobile. That said, our approach with our new consumer channel is to learn fast and continue to improve, and we have, therefore, also been developing our capabilities to provide a number from Google ... for live phone support for the Nexus One."

"Live phone support from Google combined with an optimized online support experience enables a superior Nexus One customer experience," the spokesperson added.

Google is clearly figuring out how best to proceed in an area far removed from its core business models, said Avi Greengart, research director for mobile devices at Current Analysis.

"It is closest to the Kindle model over at Amazon, where it is sold exclusively online and relies on online promotion," he told InternetNews.com.

But Google hasn't merchandised the daylights out of Nexus One like Amazon (NASDAQ: AMZN) has with Kindle. "I still don't see mainstream success in the short term for that business model because [Google] is asking consumers to change their shopping habits," he said.

That is, Google essentially requires customers to buy a phone sight unseen, over the Internet, since they can't go into a T-Mobile store and first try out the device. Greengart suspects Google may be relying on the power of the early adopter.

"It's also possible that if they get enough early adopters with these devices, they will be in the hands of influencers and other people can test-drive it that way. That's certainly been the case with the Kindle. An early adopter/influencer picked it up named Oprah. When she named it as one of her favorite things in December 2007, it was sold out for a year. It never went back into full stock until the second generation came out," he said.

Andy Patrizio is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.


Google, Android, Apple, nexus one, smart phone