Assuming that Google will not subsidize the phones, they will be significantly more expensive than an iPhone in the eyes of the consumers unless the manufacturers decide to cut corners on the components. Given a choice, would most consumers decide on A) a beautifully designed phone with high quality components for $199 with a 2 year contract B) a beautifully designed phone with high quality components for $400 ~ $500 w/o a contract C) an adequately designed phone with adequate quality components for $199 My money is on A.
Young people and old are scooping up tablets by the armload. With the iPad, Transformer Prime, and Galaxy II selling at about $600 a pop, I'd say they have money. It is discretionary money, but money nonetheless. Additionally, Verizon just announced a sunset on their unlimited data plans. Now that both At&t and Verizon have a tiered data plan, I'm betting the allure of a short term contract might be enough to get many to purchase a Google phone that is "portable" over an iPhone that is "static". Of course, this is all speculation and hearsay until the day someone at Google leaves their new prototype phone in a bar accidentally.
- If the unlocked phones follow the pricing model Google's used so far -- around $400 a pop -- in most cases, a new phone every year combined with prepaid service would actually end up costing less than what you're paying now.
I hate the world of phones where this is a cheap and viable option.