Google has launched the Nexus One, a kick-ass new Android mobile phone/computer, along with a simplified online purchasing experience that will include additional models of phone and a selection of carriers in the near future. Starting today, you can get a Nexus One bundled with a 2-year T-Mobile contract, or you can buy just the phone without a contract at a higher up-front price and use it with any GSM carrier (in the US, that's T-Mobile or AT&T; more options abroad).

By now most of us are familiar with the mobile phone business model: bundle the phone with a mandatory 2-year contract, then subsidize the up-front cost with the monthly cost. In many cases, you don't get a choice: buy it bundled with a contract or don't buy it at all. In some cases you can buy a phone without a contract, but since the cost of service isn't any different and the type of radio in the phone limits you to one or two carriers, there isn't much advantage in buying an unbundled phone. And the higher up-front cost and carriers' interest in selling contracts buries the option. That's the way it was.

With the Nexus One, Google and T-Mobile are making the contract/no-contract proposition explicit. Starting today, you can get a Nexus One bundled with a 2-year contract with T-Mobile for $179 and $79.99/month. Existing T-Mobile customers must qualify for upgrade pricing to buy the bundle. Or, you can buy a Nexus One without a contract for $529, which anyone can do at any time.

But check this: If you buy the device without service, you can get the same T-Mobile plan without a contract for $59.99/month. In other words, if you buy your own device, you won't have to pay again in the phone plan. (I suspect other carriers would do the same, but they don't advertise it.) This changes everything:

• The total cost of a Nexus One with 2-year T-Mobile contract: $179 + $79.99 * 24 = $2089.76
• The total cost of a Nexus One without a contract, plus the cost of 2 years of the same T-Mobile service with no contract: $529 + $59.99 * 24 = $1968.76

Pay for the phone up front, and you avoid a contract and save $121. To put it another way, the bundle is like buying the device on a 2-year installment plan at 22% interest, so you'd be better off putting it on a credit card and paying it down over the same period of time.

And if you still have a few months of an AT&T contract to finish, you can buy a Nexus One now with no contract, put your AT&T SIM card in it, and use it at EDGE data speeds, then switch to T-Mobile if and when you feel like it. Since you pay the same amount for the device regardless of when you switch, you might as well switch devices when you want to. And since the N1 isn't locked to a carrier, you can re-sell it if you decide to switch back to another device at any time.

By offering an equivalent-value no-contract no-subsidy plan, T-Mobile is separating the device from the carrier, which is great news for customers. In theory, only carriers that do the same will get to play that game, and that could lead to a level playing field that drives innovation of both the devices and quality of service.

But the carrier technology format (GSM vs. CDMA) is still a hurdle. iPhone users are stuck with AT&T even out of contract, and neither the iPhone nor today's Nexus One work with Verizon—though there will be a Verizon (CDMA) version of the Nexus One in Spring, according to Google's press event. With luck, eventually we'll have hybrid devices that are compatible with more carriers. And time will tell if AT&T is willing to advertise a less expensive month-to-month plan similar to T-Mobile's that would make AT&T an option for people that own their devices. (I wouldn't be surprised if they offer such a plan already but don't advertise it, might be worth a phone call.)