Why does Google necessarily care of Apple drives the price of the iPhone down? As long as Android phones can remain popular with low price points it will be the same as the current desktop/laptop market. Apple prices their products into a 'premium' space targeted at customers with more money while everyone else competes on price. The high price of the iPhone doesn't necessarily prevent a commoditized smart phone market.
I guess the question becomes: Why does Apple think that it needs to 'own' the (smart) phone business to be successful? They've been able to remain popular and profitable while keeping their products as a premium brand. Why does the cellphone market need to be so much different?
Why does the cellphone market need to be so much different?
Because Microsoft is making money selling software and commoditizing hardware, while Google sees both software and hardware as a compliment to their business (and so, gives software away for free (hardware is commoditized enough)). By comparison, Apple is trying to make profit off markup in precisely those areas: hardware + software.
In short, the numbers are very different. While laptops are now split nicely at $1000 (<1000 - mostly PC's, >1000 - mostly Macs), what we're talking about is devices Apple wants to sell for $700 soon costing less than half of that for similar "Android" manufacturers. I forget the marketing-speak explaining this, but that gap is a big problem.
In summary, Google wants a world where both hardware and software are a commodity. For Apple, this is bad, bad, bad, as that's precisely the market they're trying to make their markup.
From the reviews on the Nexus-one , it seems that there's no big difference between iphone and android. and since switching costs are much lower , this is a totally different market.
I guess the question becomes: Why does Apple think that it needs to 'own' the (smart) phone business to be successful? They've been able to remain popular and profitable while keeping their products as a premium brand. Why does the cellphone market need to be so much different?