Google gPhone is Really an Android

The media generated a lot of buzz over the past few months speculating on Google’s plans for a gPhone. With so many tantalizing clues, who could blame them? The announcement of the search giant’s actual plans landed with a thud rather than a splash – but in the end could be more significant even than Apple’s iPhone.

So what kinds of hints have there been? Well, Google has been showing a prototype phone to telecom carriers, and was reportedly in heavy negotiations with a number of carriers (and may still be negotiating with Verizon at the time of writing). Google CEO Eric Schmidt admitted that his company “has a large investment in mobile phones and mobile phone applications” in an interview. And going back to 2005, Google bought Android; Andy Rubin, one of Android’s co-founders, was also a founder of the company that created the wildly popular T-Mobile Sidekick smart phone. Well, at least everyone figured out that something related to cell phones was afoot at Google, and with the recent release of Apple’s iPhone, it’s not too surprising that a number of observers thought another headset was in the offing.

I admit that I’m every bit as guilty of climbing on board the hype wagon as any other writer or analyst. You can check out my original article on Google’s gPhone which was published in early August. Back then I pointed out that Google would be crazy to build a headset, because that kind of hardware is not and never has been Google’s specialty.

I mentioned the idea of the gPhone again, in passing, in a later article about a Google patent on payment via text messaging. Never mind that other payment systems that use this method already have a slew of active clients. In truth, this payment system came closer to pointing to Google’s actual direction in the cell phone space than the rumors of Google creating a prototype gPhone, finding a manufacturer, and maybe even buying spectrum to become a cell phone company in its own right (though the search engine truly is mulling the idea of purchasing some spectrum in the FCC’s upcoming auction). What Google hopes to bring into existence isn’t a new cell phone, but the environment that would make a new cell phone amazingly useful.

{mospagebreak title=Handset Application Economics}

Before I explain the point of Google’s Open Handset Alliance, let me give you a picture of how current application development for cell phones works. Any programmer that hopes to see his or her application used in a mobile phone must make sure it meets the requirements set by wireless carriers, cell phone manufacturers, and other software companies. On top of this, they’re doing it for very little money.

When you pay for a new application for your phone, that money doesn’t go directly to the developer. Depending on the application, a percentage of the proceeds may go to the cellular network provider, musicians and studios (for ring tones), the cell phone manufacturer, or even the creator of the phone’s operating system. As a result, many cell phone application developers hardly break even on the deal, which is one reason you don’t see more specifically mobile applications.

What does Google and its Open Handset Alliance offer in contrast to this? It’s called Android, or, as Andy Rubin puts it, “the first truly open and comprehensive platform for mobile devices. It includes an operating system, user-interface and applications – all of the software to run a mobile phone, but without the proprietary obstacles that have hindered mobile innovation.” If that idea whets your appetite, then the software developer kit (due November 12) should really get you going.

Rubin expects that opening the platform in this way will encourage developers to come up “with new applications and new capabilities we can’t imagine today.” It could also reduce developer overhead – and confusion – if it really takes off. There are currently about 40 different platforms in the mobile phone industry. While only a few of them let developers write applications on their platforms easily (i.e. without having to customize too much for different devices), developers must do significantly more customization of applications than they would have to do for the same applications on the desktop.

Interestingly, one of these platforms belongs to Microsoft, making the software giant a likely rival to the Open Handset Alliance. This is no surprise, given how often the two companies have found themselves in the same markets over the past five years. While Microsoft has garnered a dominant share of the desktop operating system market, its Windows Mobile makes up a very small percentage of the smart phone market. In short, the fragmented field is ripe for the taking, and if Google’s operating system and user interface catch on, it would even have the law of economy on its side. Jason Whitmore, general manager of mobile devices at mobile software maker Wind River, reckons that market consolidation around certain platforms, such as Google’s and Apple’s, could reduce a developer’s costs to create an application by nearly a third – and the time spent by a like amount.

{mospagebreak title=Getting the Players Together}

I’ve already pointed to one potential reward of the open mobile interface. The reduction in the amount of time and money it takes to develop mobile applications will free those resources to make more applications. Developers will also have the time they didn’t have before to make their applications better.

But Google will have an uphill battle. The list of 30 or so companies that signed up as part of the Open Handset Alliance is as notable for the companies that aren’t on it as for the ones that are. Despite rumors of productive negotiations, at the time of this writing Verizon is not part of the alliance. AT&T, having grown recently from the purchase of Cingular, is also not on the list. Among the handset manufacturers, Nokia is conspicuously absent.

On the other hand, Sprint is a proud founding member. T-Mobile also signed up as part of the alliance. And while the world’s number one cell phone manufacturer is not a founding member of the alliance, Motorola is.

If you think about it, it makes sense that some of the top names in their respective fields haven’t signed up yet, especially the cell phone carriers. “Google’s agenda is to disaggregate carriers,” explained Dan Olschwang, CEO of JumpTap, a provider of search and advertising services to several mobile phone carriers. The most prominent carriers will not be comfortable with giving up power. But Google may need these major players to make the alliance work. It will have to do some pretty sharp negotiating to get them on board.

If Google is lucky, the pressure to join the alliance will be coming from multiple directions. If consumers like Google-powered phones, they’ll want them regardless of the network they’re on – or they might switch from other networks to get them, as some 40 percent of those who bought the iPhone did. Richard Doherty, director for consulting firm Envisioneering Group, noted that “No one wants to be the last carrier to endorse Google.”

{mospagebreak title=Meeting the Challenge}

The web site for the Open Handset Alliance gives a list of frequently asked questions in which it explains why the alliance is a good thing. The FAQ states that an open platform is good for consumers, mobile operators, handset manufacturers, semiconductor companies (Intel is part of the alliance), software companies, and developers. But not everyone agrees. And some have been fighting back.

Vodafone and NTT DoCoMo are investing in open source software on their own; they co-founded the LiMo Foundation. Symbian already boasts one of the largest mobile developer communities, with more than 75,000 registered developers – and it just dropped the fee to register applications to $20, from several hundred dollars. Both Motorola and Nokia are releasing new software tools for their phones to encourage third-party development.

While open source movements often end up strong, they take time to get traction. Rubin pointed out in his blog entry on Google’s site that the changes the alliance hopes to achieve “will take patience and much investment by the various players before you’ll see the first benefits…If you’re a mobile user, you’ll have to wait a little longer, but some of our partners are targeting the second half of 2008 to ship phones based on the Android platform.”

Of course, many users may never want or need an Android phone. That’s one reason why Google is continuing its other mobile initiatives, such as Google Maps and Gmail for the mobile phone. It plans to develop more applications as part of this initiative as well.

Whether the mobile applications are free add-ons from Google or were created by third-party developers to work with Android, however, you can expect that anything free will eventually be paid for by some kind of Google-connected advertising. Whether enough consumers are willing to accept advertising with their cell phones – and whether enough carriers and handset makers will settle for the percentage of the revenue that Google is willing to share – to make this work, remains to be seen. Analyst Ken Dulaney at Gartner maintains that “Building an OS is the dumbest thing [Google] could do.” Time will tell whether the markets agree.

[gp-comments width="770" linklove="off" ]