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2013: Google Leads a Phone Price War

Stocks in this article: GOOG AAPL VZ S MSFT T

With a Nexus starting at $199, the price between totally constricted contract phones -- requiring laughably expensive monthly plans -- would be blurred with a SIM-unlocked, contract-free Nexus enabling a user to cut the monthly expense by two-thirds.

It's easy to dismiss competition against the outstanding iPhone 5 but, at some level, price does matter. If an iPhone 5 will cost three times as much to own and operate over two years, it has to impact market share.

Finally, Mobile VoIP

VoIP started over landlines with Vonage in 2002, and we hardly even think about it anymore. Flat fee landline calling has now been available from $0 to $30 per month for years. That war is over, and VoIP won.

The wireless VoIP war has not really started yet. Yes, there are VoIP alternatives in the marketplace, ranging from FaceTime to Google Hangouts to Skype, Tango and many more. They tend to be for "in-network calling" with some enabling calling outside for a fee.

The problem with "in-network" VoIP systems such as Tango and Google Hangouts is that only tech geeks tend to use them. Regular people want something that is universal. We have three such electronic networks today: email, telephone numbers (calling) and SMS on the same telephone numbers.

On the PC, Google already offers free unlimited calling to regular phone numbers. It could do the same on cellular networks too, but pre-LTE cellular data has been shaky, yielding erratic quality. This is now changing, and by the second half of 2013, the buildout of LTE networks will be essentially complete by most of the major carriers.

This becomes Google's inflection point. When LTE is essentially universal, it can simply offer cellular devices such as smartphones the same kind of free calling as it now has been offering on PCs for years. This will happen by the end of 2013.

In principle, Microsoft (MSFT) could offer the same with Skype too. The question here is if Microsoft is going to be willing to compete on price. Skype calling to regular phone numbers isn't free on the PC.

What about Apple (AAPL)? It's got nothing significant on this front right now, outside iMessage and FaceTime. If Apple cannot compete here, it could be crushed by the end of 2013.

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