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The Chromephone and Its Market Structure

The Chromephone could also be the vessel for Google to introduce pure VoIP. Rather than buying circuit-switched minutes from the likes of T-Mobile and AT&T (T), all you would need is a pure data plan for $30 or perhaps even $19, and you would be getting free calling and SMS -- plus a fat monthly data package of 5 gigs or much more.

What Would They Cost?

Google is targeting $199 for unsubsidized phones and $99 for tablets, compared to $199 for the current Chrome OS laptops made by Acer. There would be no contracts, just pay-as-you-go data from whichever operator you prefer. Basically, get a T-Mobile plan from Wal-Mart or Amazon for anywhere between $19 and $30 a month, no long-term contract required.

Food Chain Impact?

On the chip side, Intel looks like the likely winner, with Nvidia as the dark horse. Samsung could capture a big piece of the pie if it bothers to play, which is not a given. Seeing as Chromephones would take share from Android, Apple (AAPL), Microsoft (MSFT) and BlackBerry (BBRY), Qualcomm has the most to lose.

On the system side, it's more likely that the traditional PC players -- Acer, Asus, HP, Lenovo, Dell, perhaps Sony -- would use the Chromephone and Chromepad inflection point to take share from the companies who are strong on the smartphone side -- Samsung and Apple, primarily. This is yet another reason why we should expect aggressive pricing on Chromephones and Chromepads.

In other words, Google would look more like Microsoft in the desktop PC days, totally commoditizing the hardware makers and telcos. However, in this case Google would provide some of the telco services -- telephony and SMS -- for free, just using the telcos for "pure data pipe" purposes.

Look, I know many of you don't believe me. You don't think anything is going to change. You think Android is Google's final and only word in mobile computing. If that's what Google indeed thinks, Google eventually becomes one big short -- 100% dependence on Android forever is too risky, and eventually a better product is more urgently needed. It's just a matter of time.

Microsoft and BlackBerry both waited too long to rejuvenate their mobile operating systems, and look where it got them. Now they are in the 3%-to-6% market share range, with Android dominating the industry at 75% market share, and Apple as the intermediate-range ankle-biter.

Google is riding high on the Android hog now, and it will not abandon Android. What it should do, however, is to add Chrome OS on smartphones and tablets as the insurance policy that the situation warrants -- the sooner the better. It would make for a better product, eliminate fragmentation and increase Google's power over the network operators.

Not a bad outcome for an insurance policy.

At the time of publication the author was long GOOG, APPL, NVDA, BRCM and INTC.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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