Google phones may ring in the new year

Google is reportedly considering offering its own mobile phone based on the Android operating system as early as next year.

Although the company is not confirming its plans, it has been widely reported that Google has already given test phones to employees. (According to a Google blog post in response to the reports, the company's employees often experiment with new technologies.)

If Google actually does release its own phone, it would pit the company against carriers and handset-makers that have released Android-based smart phones. Such a move could also put pressure on Microsoft to go a similar route, perhaps offering a smart phone based on the Zune that incorporates some or all of the components of the Windows Mobile platform.

At any rate, Google's move is expected to challenge market leader Apple, whose iPhone and iTunes App Store are the dominant mobile platforms.

Google employees testing the phone told the New York Times that the Google phone will be unlocked, allowing users to choose their service providers. It will also be GSM-based, the same technology "used by AT&T and T-Mobile in the United States and by most other carriers around the world," according to the Times article.

Analysts believe Google's interest in offering its own phone is to cash in on mobile advertising. The phone would possibly be subsidized by advertising rather than by carriers, Forrester Research analyst Charles Golvin wrote in a blog post about the implications of a Google phone.

"I think they are trying to get the market to a place where mobile advertising is as big as the market can be, and they are trying to move the market faster than it would otherwise move," said Yankee Group analyst Joshua Holbrook in an interview.

Although a phone from Google does run the risk of annoying handset providers who are supporting Android, Holbrook said, Google will likely offer limited-device (if not single-device) configuration, allowing handset-makers to offer more choices.

Telecom analyst Tom Nolle of CIMI Corp. said it remains to be seen whether Google will follow through. But if it does, "what's likely happening is that Google is viewing this as a move against the telco walled-garden approach by moving against the bundled handset programs that put the operators more in the driver's seat with innovation in cellular," he said in an e-mail interview.

Meanwhile, the buzz over a potential Google phone also highlights the question of whether Microsoft will change its position on offering its own phone, something the company has insisted it has no plans to do.

Nolle said it would be too risky for Microsoft to jump into the phone market, even if Google does.

"I think it doubles down on Microsoft's risk," he said. "They have a lot more to lose by getting directly into the cellular business than Google does. Microsoft expected to make money on Windows Mobile, and they'd certainly kill off all their handset partners if they decided to sell phones of their own. Imagine what would happen to Windows if Microsoft sold computers. Google Android is open source and free, so Google might very well be able to sustain partner interest even with its own handsets."

Holbrook agreed. Microsoft "said...repeatedly they won't and just recently reiterated it," he said. "I'll take them at their word, and frankly I don't think they will because at the heart, they are a software company. That said, if there is anything that can get them to change their mind and do that, it would be Google."