UPDATE: Google Unveils Android Smartphone for T-Mobile

NEW YORK -(Dow Jones)- Google, Tuesday unveiled its first Android-powered smartphone for T-Mobile USA as the Internet giant hopes to shake up the wireless industry.

The G1 represents the first direct attempt by Google to link its name with cellphones. The company, which dominates Internet search, has struggled to break through the controls of the carriers and establish a strong foothold in the mobile Web. The phone arrives following months of speculation and buzz surrounding the "GPhone" and its prospects as a rival to Apple's iPhone.

Cole Brodman, chief technology officer of T-Mobile USA, called the device a "game-changer."

"The mobile Internet experience hasn't been compelling," he said. "We're going to change that."

The high-profile device also means a lot for T-Mobile USA, a unit of Deutsche Telekom, which needs a flagship device to promote its burgeoning third-generation network. And Taiwan's HTC Corp., which made the phone, has slowly built up its brand as a premier smartphone maker over the past year.

"T-Mobile desperately needs a device like this," said Avi Greengart, an analyst with Current Analysis. "they don't have anything to monetize their 3G network."

For Google, it's a strategic investment to position themselves in the future, he said. He noted, however, that Google could still win out in mobile search if the other handset makers move toward a more open experience.

The G1 is a touchscreen smartphone with a screen that slides up to reveal a full keypad underneath. The device is compatible with T-Mobile's 3G network, which is in its early roll-out stages. Front and center on the handset is a Google search interface.

The G1 will sell for $179 with a two-year T-Mobile contract in the U.S. The device will be available in the UK in November, and throughout Europe in the first quarter 2009.

The device also features a mobile Web browser similar to Google's Chrome browser for the PC. The iPhone's slick Safari browser has other handset makers working to improve their experience, and the mobile browser category is seen as an open one.

Data plans range between $25 and $35 in addition to a voice plan. Brodman said that 22 markets will have 3G when the phone launches, and a total of 27 markets will have 3G by November.

The device will also have Wi-Fi capabilities.

For all of that, "the pricing is aggressive," said Ross Rubin, an analyst at NPD Group.

He noted that no other phone has had the ability to pull customers like the iPhone. The G1 could be the next, he said.

Gartner analyst Carolina Milanesi estimated that 600,000 to 700,000 G1s will sell by the end of the year. She said she's convinced Google is setting itself up to be the de-facto Linux-based operating system standard, and expects it to dominate the 10% market share Linux will have of the smartphone market by 2011. In comparison, Windows Mobile will hold 18% by then.

T-Mobile declined to give their expectations for unit sales, saying only that it expects it to be a best-seller.

"Software companies are driving the next generation of mobile phones," said Rich Miner, a key member of Google's Android development staff.

Miner said discussions with other carriers are ongoing and the platform has received strong interest.

Miner said Google would continue to work with its handset vendor partners, and wasn't looking to get into the hardware business.

Brodman said the phone will be pushed by the largest marketing campaign ever by T-Mobile. While he expects the phone to appeal to all, he said it is geared more toward the consumer.

"G1 is a milestone in bringing the open Internet to the mobile platform," said Christopher Schladder, group product and innovation officer for DT.

Google is eager to get into the mobile arena because of the lucrative opportunities that come from marrying its targeted ad technology to the phone's ability to determine its user's location. The company has said that mobile advertisement represents a huge source of growth.

"The smartphone industry is in a gold rush and this is why Google and others are jumping in," said Scott Rockfeld, group product manager for Windows Mobile.

Google has already made ripples in the industry. Its maneuvering during the last wireless license auction forced Verizon Wireless to commit to open standards for its network. Its creation of the Open Handset Alliance also pushed the carriers into their own alliance. Verizon Wireless - jointly owned by Verizon Communications and Vodafone Group - joined the LiMo Foundation, while AT&T joined the Symbian Foundation.

AT&T also says it is open to the idea of an Android phone.

"If it makes sense for our customers, it's something we will consider offering," said AT&T spokesman Mark Siegel.

Android is similar to Apple's software in that it is a smartphone operating system focused on the consumer first, its supporters say.

"One thing that Android's launch does do is it drags mobile operating systems into the consumer psyche and handset purchase decisions even more," said Alex Moukas, chief executive of mobile marketing firm Velti.

Also heavily touted is the Android Market, which is similar to Apple's App Store in making available programs from third-party developers.

A program by developer Shop Savvy that turns the G1 into a bar-code scanner was shown off as an example of the available applications.

The programs available in Android Market will initially be free. But eventually, Google and T-Mobile will charge for some programs. There was no timing on when that would occur.

While the pricing puts it $20 below the iPhone, Leslie Grandy, vice president of product development for T-Mobile, insisted the carrier wasn't just targeting the Apple device.

Google isn't wholly relying on the G1. Another Android device for Sprint Nextel is in the works.

Andy Rubin, senior director of mobile platforms for Google, called Android "future-proof" because of its open nature.

Realizing the importance of the device, Google founders Larry Page and Sergey Brin rollerbladed their way onto the stage and touted the phone's ability to run custom programs. Page said he expects to see programs using location-based services.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 23rd September 2008