UPDATE: Google's Mobile-Phone Strategy Keys on Open Standards
Published on: 5th Nov 2007
Note -- this news article is more than a year old.
WASHINGTON (Dow Jones) With its bid to bring open technology standards to the mobile phone market, Google Â is leading a strategy that could make devices cheaper and give consumers more control over their phones' capabilities.
The search giant, which unveiled a broad alliance on Monday, is teaming up with major technology companies including Motorola, Qualcomm, Samsung Electronics, Sprint Nextel and T-Mobile USA in an effort that could change how the mobile-phone industry operates. The Open Handset Alliance includes 33 members.
Yet until mid-2008 at the earliest, the companies won't have any phones based on the open platform created by Google, known as Android. Though the near-term impact on consumers and the broader wireless market is negligible, that could change over time.
"The Internet has proven that an open model leads to a lot more innovation and choices for consumers," said Charles Golvin, a wireless analyst at the consultant firm Forrester Research.
He said Google and its partners could tie the mobile and Internet markets together and force other companies to join in their efforts if they are successful.
At present, wireless companies such as AT&T and Verizon Wireless use proprietary operating systems and control what software their customers can have on handsets.
Customers at Verizon, for instance, have to use software chosen by the company to create a list of contacts. They cannot transfer their contact list to another phone if they switch to a rival provider like Sprint.
By controlling the software on their phones, wireless firms believe they can differentiate themselves from competitors and perhaps generate higher profits, while also keeping a rein on sensitive customer information. They are also wary of losing control over their networks, which are expensive to maintain and bump up against persistent bandwidth limitations.
A Verizon spokesman said the company shares Google's goal of more open standards and has not ruled out joining the group.
Google, for its part, is worried it could get frozen out of that lucrative mobile market unless customers can use its search engine. As consumers switch to phones with Internet capability, they are expected to conduct more Web searches on mobile devices.
Google has even considered bidding for wireless licenses and building its own mobile network, and speculation persists that the company could eventually develop its own "Gphone," to compete with Apple's iPhone.
Google Chief Executive Eric Schmidt declined to comment.
"We are not announcing a Google phone at this time," said Schmidt, who would not acknowledge whether such a device is forthcoming.
Shares of Google were up almost 1.5% to $721 in late trading Monday.
The success of Google's initiative will depend heavily on the follow-up efforts of allied phone companies and handset makers.
For instance, Sprint and T-Mobile USA, the two U.S. carriers that have joined Google's alliance, see an opportunity to gain an edge on rivals. Sprint, the nation's No. 3 mobile operator, and T-Mobile, the fourth-largest carrier, trail market leaders AT&T and Verizon.
Sprint in particular needs to do a better job to differentiate itself. The carrier has lost more than 1 million of its most valuable customers over the past year, mostly to the top two players.
For its part, Motorola, the world's No. 3 maker of wireless phones, has lost significant market share over the past year and is seeking to regain its footing.
The adoption of Google's open-standards software could help Motorola reduce the cost of its phones and make its devices more attractive to consumers.
The individual strategies of different companies aside, Qualcomm Chief Executive Paul Jacobs said that open standards for wireless phones would make the potential revenue "pie" larger for every company in the mobile market, whereas a closed approach limits revenue opportunities.
"The wireless Internet is opening up a lot of opportunities for the entire industry," Jacobs said in a conference call to announce the alliance.
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