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Amazon Android Smart Phone Could Upend Industry

Amazon is building its own Android phone, but what will it do with it? Will it be just another Android phone, or will Amazon seize the opportunity to throw the current business model--and AT&T, Verizon, T-Mobile and Sprint--overboard?

Word on the street is that Amazon's developing a smart phone, almost certainly intended as competition against the iPhone. After all, the reports indicate the "AmaPhone" comes courtesy of the same hardware maker who gave us the iPhone--Foxconn.

But the one really big question with this phone isn't going to be the hardware or software. It's what carrier Amazon will use, if any. Amazon's plans could disrupt the entire mobile business.

When Apple set to work on the first iPhone, it was astounded at how much push-back it got from the carriers over things such as device branding and carrier-specific feature sets. AT&T, Verizon, and T-Mobile have far more influence over what kinds of phones we carry around and what they can do than do Samsung, HTC, or Nokia. The fact that Apple won its own battle sadly did not open a floodgate for other handset makers to win theirs.

A big part of why unholy alliances develop between handset makers and carriers is to make handsets affordable up front. If I pay $199 for a hot new handset that might cost quite a bit more than that to actually make, the only reason I can do that and not have everyone (me included) go broke in the process is because I signed a two-year contract with the carrier. By the time that contract is up, I've likely paid for that phone several times over--the price, both literally and figuratively, of owning a modern cell phone. If everyone had to shell out full price for an unlocked phone, nobody would bother with them and smart phones would still be executive-level exotica akin to the first BlackBerry models.

Is Amazon planning to do anything about that? Because it would be fascinating--and truly disruptive--if it did.

What would be genuinely dangerous for Amazon would not just be to develop its own phone, and not even to buy connectivity wholesale from a carrier much as it did with the lifetime 3G service plans for the Kindle. It would be to kick start a new carrier service altogether, one genuinely open to innovation from the handset side. That's what condemned projects such as the OpenMoko to obscurity: no one was willing to make the network side of the phone as open as the handset side, because the existing setup is tidily profitable.

Back in 2008 when Android was first ginning up, Google announced the Open Handset Alliance, a consortium of phone makers committed to making Android a sure thing. They were successful, in that they made Android into a staple presence in the smart phone space. But even a behemoth like Google didn't try to do anything about the closed-endedness of the way phone networks operate. The closest I see anyone coming to this is Microsoft allegedly making Skype into an integral part of the next generation of Windows Phone. But again, without the carrier side doing things differently, it's a dead end--I don't see too many people only using their phones over household Wi-Fi.

The problem is, I don't see carriers or networks being in Amazon's portfolio. That might well come courtesy of the ex-Microsoft folks it hired to help round out its patent portfolio, or a third-party acquisition yet announced.

Up until now, there has been almost no concerted attempt to do something about the single biggest obstacle to real cell phone innovation: the suzerainty of the cell networks. Most everyone either accepts defeat or thinks: why mess with a good thing? Answer: because messing with a good thing is how you make better things. Let's see if Amazon rises to that challenge.

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