Why your next smartphone may be free

Speculation abounds that Facebook is working on a phone and it seems more than logical to assume it will be based on Android and sold via carriers. In fact one would imagine AT&T is trying like crazy to get an exclusive deal with the company as they desperately need a new hot product when the iPhone potentially becomes available on other networks.

In fact, it would be surprising if carriers haven’t been chasing Facebook down to get such a phone with mass appeal out of the gate.

At the moment the social networking company can do no wrong and I expect it to seriously consider evolving itself in similar ways to Google.

In fact when you think about it, virtually all companies are looking to add social elements to their products – from search to shopping and more recently Apple’s Ping which makes music more social. Doesn’t it make sense for Facebook to provide some of the other services we use today and more seamlessly tie them into its services?

Last year, I argued that Facebook presents a serious threat to carriers as it is entrenching itself at the center of the customer relationship. But as we saw with Apple, AT&T was willing to give up part of the relationship in exchange for a super-hot product which boosted sales.

Now it seems like Facebook may provide the next hot must-have phone and carriers are likely salivating at the opportunity to share in the profits. But they better realize that Apple, Google and now Facebook are slowly becoming keepers of the relationship with customers.

The flipside though for all carriers is that increased competition from companies which can monetize user interaction through ads may lead us to a point where smartphones from these companies are provided for free in exchange for showing you ads. The concept of free phones is not new but free smartphones could signal a major change in how the market operates and could lead to even greater 3G wireless network congestion.

To learn more about how 3G networks are transitioning to 4G be sure to attend 4GWE in Los Angeles in 2 weeks – an ITEXPO collocated event.