Did Google's unsubsidized Nexus fail in a free enough market?

The Tech Liberation Front has a post about Google's failure to attract customers to its unsubsidized smart phones, and reasons that the widespread subsidization of phones by wireless providers (the reason your iPhone only costs $199) must be the market, revealed.

I'm a bit weary of the "market has spoken" kind of talk, though, considering how managed the wireless market really is. The government doles out spectrum rather arbitrarily, shaping the market in a pretty heavy-handed way. Even an auction system is still imposing a perhaps unnecessary layer of government control – open spectrum and competition in interference avoidance might utilize the spectrum more efficiently than either the status quo or an auctions.

I'm not sure how exactly the government intervention is pushing carriers towards offering subsidized phones, but the whole industry is just too managed to be accepted at face value as a working market. I'm not saying that there should necessarily be a complete free-for-all, but until the government does with long distance-capable bands what it did with the frequencies now used for wifi, I'm going to be skeptical of any weird things that the wireless industry comes up with.

Here is my archive of open spectrum-related posts, for those interested in the idea of ending government control of the airwaves.