Microsoft Phone Idea Is NutsMicrosoft Phone Idea Is Nuts

Over at Ars Technica, Peter Bright has proposed that if Microsoft really wants to succeed at Windows Phone 7, the company should build its own phone. That idea is, in a word, nuts. It doesn't address any of the real problems that Microsoft has in this market.The article argues that Microsoft has a better chance of succeeding if it can attain better vertical integration. The problem (for Microsoft at least) is that it can never attain in mobile platforms the kind of integration that made Windows so successful on the desktop. Microsoft just does not have the kind of leverage in the mobile world that they do in desktop PCs.

Even though Microsoft ostensibly supplies only a component of the desktop PC manufactured by dozens of different companies, it has been able to control the direction of the PC industry because it is the critical component; there are few viable options to Windows. Microsoft has no hopes of controlling the mobile platform that way. Power currently rests with the carriers like AT&T, Sprint, T-Mobile, and Verizon. To have your mobile device be successful, you must have a friendly and servile relationship with them. Only Apple has managed to break that rule, and the iPhone got a first-mover advantage that nobody can duplicate.

Who does have good existing relationships with the carriers? Handset makers like HTC, Motorola, and Samsung. Inevitably, one of these companies would end up making a hypothetical Microsoft Phone, even if it had Microsoft branding. And what is the value of Microsoft branding on a phone, anyway? If Windows Phone 7 succeeds wildly and becomes something that consumers seek out, there might be some reason for Microsoft to brand its own phone. For now, though, Microsoft should be grateful if it can get WP7 onto a decently sized selection of phones on multiple carriers.

The Nexus One experience at Google provides an even better example of why Microsoft would be nuts to build its own phone. The Nexus One is an excellent phone, built to Google specifications by HTC, yet Google was unable to sell significant volumes of the phone online. That is because the carriers sell most handsets in their own stores and subsidize the purchase. American consumers are just not used to buying phones online, even if they are comfortable with buying their PCs online from companies like Dell.

Having AT&T as the premier carrier for WP7 may be the first misstep that Microsoft has made. This could be the same fiasco as when Verizon completely hosed the pricing on the Kin phones, making them a financially stupid move for teen hipsters. (They may have been a bad move already for most users, but high data-phone pricing sealed the Kin coffin.) The AT&T commitment to WP7 is suspect as well, given that the company and their salespeople can always fall back to their tried-and-true iPhone. None of these problems are solved by a Microsoft Phone, and Kin was the proof of that.