In the UK at least, we're used to free phones. But there's no such thing as a free lunch as most phone users can attest to. I recently returned from holiday to find an £80 phone bill sitting on the doorstep. Mobile phone companies have admitted to making up the money from discounted phones by stinging us when we're abroad. The EU will be capping mobile phone companies charges from September, but you can guarantee 02, Orange and Vodaphone will find some other way to extract cash from their unwitting customers.
It's into this sort of market that Apple and Google are entering. Each with radically different approaches. Apple is doing what it does best: creating great hardware and letting the mobile phone companies do what they do - handle networks. Google, on the other hand, appears to be doing something very different. It's trying to take its ad-based model into the mobile arena.
The Google phone will probably hoover up all my personal information; read all my texts and maybe even listen in on my phone calls. It'll then probably use this information to target ads based upon my personal information. Privacy concerns are an ongoing issue with Google, but it's clear that the younger generation don't share the concerns of their parents. Personally I don't find ads offensive, nor do I find targetted ads offensive. In many ways the sublime and accurate advertising of Google is infinitely better than the ham-fisted 'say it loud' approach of traditional adverts.
Time will tell if Google is onto a winner. I - for one - will be watching this development closely.