Soliciting Theories about Potential "Surface Phone"

So I've been thinking quite a bit about the "Surface Phone" rumored to be arriving next year.

Most of the renders that I've seen (or maybe just that one) seem to conceive of the Surface Phone as nothing more than a really cool-looking phone that matches the aesthetic of the Surface tablet products. But I think that it's unlikely would be able to maintain good relationships with its partners if they were simply competing against them in the standard mainstream-premium handset market. As many have noted, unlike in the PC market MS's current OEMs are putting out some of the coolest, highest-quality, best-looking hardware on the market. So it can't just function as a north star for quality and design.

With that in mind, I've come up with three possibilities as to which way MS could go with this device:

(1) Ultra-Premium, Note-Style Phablet.

This is where Microsoft decides that it needs a true halo device for Windows Phone. Apollo Plus will deliver support for 1080p resolution, which acomoodates two double-wide tiles side-by-side as well as a "super tile" available for select built-in apps that's basically a double-wide scaled all the way up. It would display even more detailed information from your calendar, messaging, or email app, or could be used simply as a large panorama for your Pictures hub. Like the Note 2, it would sport a quad core processor and huge 3100mAh battery, but would be sealed with 64gb of memory. The body might feature a Surface-style integrated kickstand that allows you to watch movies or use it as an alarm clock on your night stand. Probably no stylus input would be supported. It would retail for $299 on contract across carriers. As with any halo device, the idea would be that this would be a high-visibility, low-volume device that would lend credibility to the platform.

This would be acceptable for MS' partners because it's priced out of the range of most consumers, so it's not really competing with the HTC and Nokia devices.

(2) Bargain Basement, Cheap-as-Chips Budget Device.

This would be where Microsoft identifies pure volume as its goal, and decides to create a stylish low-end device with a good UX that would compete with the free-on-contract devices on the major carriers as well as with the super-low MSRP off-contract devices on the budget and regional carriers like Virgin Mobile, Cricket, Straight Talk, etc. The idea would be to have these retail for $250 w/o a contract, and by doing so juice the number of WP8 devices sold in 2013 by an extra 5-10M units. That sounds like a high estimate, but in the aggregate this market is as big as either Verizon or AT&T, and they're carriers where the iPhone doesn't dominate due to the high sticker price.

This would be less acceptable for MS' partners because it would compete directly with their budget devices. However, with ecosystem being an all-important factor in devices sales, they might be willing to trade some competition at the low end in exchange for a larger installed base that's more attractive for developers. Also, AFAIK Nokia and HTC don't offer any devices on the regional carriers at this point in time.

(3) The Mainstream Premium Device.

This is the one where I'm wrong, and MS is going to come out and compete with their partners directly. This is the one where MS decides it's going to walk right out onto the killing floor, and hope that it doesn't get slaughtered despite a poor history of handset manufacturing performance and no discernible advantage over its competitors.

This is clearly the least acceptable option for MS' competitors. Yes, there's something to be said for creating a richer menu of WP devices, and that the auto mall phenomenon (where auto dealerships that crowd right next to each other each sell more cars than they would have if they weren't right next to their competition) might play into HTC and Nokia's favor in carrier stores. But that's entirely speculative, and it just doesn't look good. Another possibility is that the Surface Phone would only be sold via Microsoft Stores, and would be sold off-contract and potentially feature some kind of tight integration with Surface. Maybe for $1000 you can buy your kid a Surface RT and a Surface Phone, and they partner with Straight Talk wireless and sell you on the $40 all you can eat plan that also lets you tether the tablet to the phone. Might be an attractive alternative, from a parent's perspective, to a MacBook Air + iPhone + expensive long-term data contract.

So, what do you think?

Any ideas?