Nexus One Makers Soothe 'Growing Pains'

Like many technophiles who were among the first to snap up the new Nexus One smartphone, Rob O'Connor has had to put up with an inconvenience or two. The Aspen (Colo.) information technology executive ordered his new Google (GOOG) gadget on Jan. 5—the same day it was unveiled to the public—and has been forced to manually reconfigure settings for the device to connect to T-Mobile's faster, 3G network in more locations. The Nexus One often does not discover that network and, as a consequence, users surf the Web at slower speeds—a major source of frustration for buyers posting complaints online. "It's definitely annoying," O'Connor says. "If it lasts a long time, I would be aggravated. I am willing to give them a week or two [to work out the issues]." The phone's manufacturer, HTC (2498:TT), has acknowledged a 3G connection problem and says it is working to resolve the matter. O'Connor's is just one of many complaints Nexus One owners have logged in recent days. Gripes range from slow connection speed to confusing customer service and the unwillingness of T-Mobile USA to lower the price of the device for existing customers. Customers new to T-Mobile USA can buy the Nexus One for $179 with a new two-year contract, but everyone else has to shell out $529. Another complaint: Google charges customers who leave T-Mobile more than two weeks but less than 120 days into their contract an extra $350—a hefty fee that comes on top of the usual charge T-Mobile assesses whenever a customer bails out of a contract early. Some Buyer's RemorseGoogle, HTC, and T-Mobile USA will have to work fast to resolve the ordering-process, technical, and support issues raised by the first crop of buyers of their new device. "I'm a big Google fan but I'm really regretting my impulse buy," a commenter called Midgetall posted on Jan. 11 on Google's Mobile site. "With the hassle, hidden costs and complete lack of support I'm really regretting it. Is it just me or do you feel like you have been let down?" Nexus One is the first gadget to be sold exclusively through Google's new online phone store instead of through carriers or brick-and-mortar and online retailers like Best Buy (BBY). That means customers can't walk into a retail store for help; instead they must rely on telephone or e-mail support. "This is a new business model," says Keith Nowak, an HTC spokesman. "And we've seen some growing pains about who deals with which issue." To reduce response times to customer queries, the Nexus One partners have worked to better subdivide their support duties in the past several days. HTC has assumed hardware questions, with T-Mobile fielding calling-plan issues. Google functions as the main online landing page that directs consumers to one or the other partner. HTC transfers callers who have questions about T-Mobile's calling plans directly to the carrier, so they don't have to redial, Nowak says. The device will be available on Verizon Wireless (VZ, VOD) later this year, and it is also available without a contract. HTC is also investigating the 3G connectivity issues, raised in 641 posts on the Nexus One online forum so far. "We are aware of these concerns, and are addressing them now," Nowak says. "We have a lot of manpower working on this. We hope to have an answer pretty soon." Customer Learning CurveSo far, the number of customer calls HTC has received about the Nexus One has been in line with the number of calls fielded about other phone models, such as T-Mobile's G1 and myTouch 3G phones, Nowak says. "We've certainly not been overwhelmed with calls," he says. "There's nothing overly outstanding about the volume of calls." HTC and T-Mobile USA offer phone support, while Google answers questions only through e-mail. There are several reasons why users may have more questions about the Nexus One than your average phone: While most consumers are used to buying and activating phones at carriers' stores, fewer have experience doing so on their own, online. Nexus One is also one of a minority of mobile devices that can be purchased without a carrier contract, as a so-called unlocked phone. Because it can be used on different carriers' networks, an unlocked phone typically requires its owner to perform more legwork to get set up with a carrier. "We are learning, and our customers are learning," Nowak says. Whenever a new device comes out, there can be glitches and customer complaints. When Apple (AAPL) rolled out its iPhone in the summer of 2007, users complained of trouble activating the devices. In 2008, BlackBerry maker Research in Motion (RIMM) suffered complaints about sluggish software for its BlackBerry Storm model. Despite the activation complaints Apple's sales skyrocketed, but Research In Motion saw complaints dent Storm sales. "I don't think it got the traction it might have otherwise had because the brand got tarnished," says Matt Thornton, senior research analyst at Avian Securities. Problems "can take the shine off a hot new product," he says. Barclays Capital analyst Doug Anmuth expects Google to sell 5 million to 6 million Nexus One phones this year. In the week it was announced, Nexus One search queries reached more than double the volume of those for the iPhone, according to consultant Hitwise. Lack of a T-Mobile UpgradeOne hot-button issue users are raising concerns the inability of existing T-Mobile USA customers to upgrade to the Nexus One at the $179 rate, currently only offered to new T-Mobile customers who sign up for a two-year contract. That issue has drawn 582 posts on the Nexus One forum. "I might just go to a new [wireless] company," says Mikaela Bufano, a New York television producer who has been with T-Mobile for more than five years. "I feel it's not really fair." After three days of researching and contacting T-Mobile and Google in an effort to buy the Nexus One at a discount rate, she says she's considering buying an iPhone and switching to AT&T Wireless (T). Google may need to rethink its online retailing strategy, as well. The search giant may not be able to afford to stay on the sidelines and not provide phone support to aggrieved customers for long. "It's branded the Google phone," says Will Stofega, a program manager at consultant IDC. "Your name is on the front [of the device], who do you expect customers will go to? That's not a good response to have." Google may need to beef up its own call-center support to be able to, in the future, sell a massive volume of phones to corporations that demand plenty of attention. "They should step up to the plate," says Stofega. For its part, Google says it is open to tweaking its retail and support processes. "We'll continue to address all issues in as timely of a manner as possible, and we're flexible and prepared to make changes to our processes and tools, as necessary, for an optimal customer support experience," Google spokeswoman Katie Watson says.

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