"I think this would be ideal: make carriers compete on network quality alone, and make handset makers compete cross-carrier on handset quality alone."
I think we can all agree that is the ideal, but just how is anything that Google doing going to change that? If everyone starts paying full price up front, there's still no motivation for phone companies to bring down the (much inflated) price of their "service". If google offered a good cellphone service (and sold phones up-front) they might be able to change the status-quo. If they don't have a network they don't have a bargaining chip and the American public has no motivation because they'll be paying extra for the phone and for the service. Unlocking a phone is nice for those crazy phonophiles but for average Joe bag-a-donuts it doesn't warrant the up-front cost without extra incentive (such as lower cost plans)