It's official: Google Inc. will sell its own mobile phone in an effort to protect its online advertising empire as people increasingly surf the Web on handsets instead of personal computers.
The phone, announced Tuesday, had been widely anticipated since Google handed out the device, called the Nexus One, to its own employees three weeks ago.
Consumers will be able to buy the Nexus One for $179 if they commit to a two-year service contract with T-Mobile USA. Google will handle all sales online and has no plans to let consumers check out the Nexus One in retail stores.
Google also will offer versions of the Nexus One that will give people the option of selecting the wireless networks of other major carriers. That's a departure from the way most mobile phones have been sold in the U.S.
The price of these so-called "unlocked" phones will be $529.
Verizon Wireless in the U.S. and Vodafone in Europe will begin offering subsidies on the Nexus One this spring, according to Google executives.
Given the hype, the Nexus One could be a bit of a letdown because it only takes a few incremental steps beyond what's already possible on handheld devices. And the Nexus One's standard sales price of $529 may lessen its appeal in a still-shaky economy.
The Nexus One escalates Google's budding rivalry with former Silicon Valley ally, Apple Inc., which has sold more than 30 million iPhones in the past 2 1/2 years. Apple announced a deal Tuesday to buy mobile advertising service Quattro Wireless to counter Google's proposed $750 acquisition of Quattro rival AdMob.
Google Inc.'s vision for how a mobile phone should be made and sold will likely raise the stakes in the Internet search leader's bid to gain more control over how people surf the Web while they're on the go.
Google is billing the Nexus One as the first "super" phone in an effort to position the device as a cut above the iPhone and other smart phones such as Research In Motion Ltd.'s more utilitarian BlackBerry.
It appears to be sleeker than other phones, as thin as a pencil at 11.5 millimeters and as light as a keychain-sized Swiss army knife at just 130 grams. Among other things, the Nexus One will offer more ways to customize the phone's home page and use voice recognition technology to perform more tasks, including composing e-mails and navigating Google's mobile mapping products.
In its invitation to Tuesday's announcement, Google said the wireless market had only seen "the beginning of what's possible" with the free Android operating system that it introduced for mobile phones in late 2007.
Android was designed to make it easier to interact on a mobile phone with Web sites and services, including Google's, while providing an egalitarian platform to run applications developed by outside programmers.
The applications don't have to go through an extensive review before they can be distributed to Android-powered devices, a contrast from the control that Apple Inc. holds on its hot-selling iPhone.
Until now, Google has been content to let other companies design the devices relying on Android. And those devices thus far have largely been distributed like most other mobile phones, tethered to major wireless carriers that typically require buyers to lock into two-year contracts in return for discounts on the handsets.
But Google now appears to be ready to push its operating system in a new direction while trying to give consumers more flexibility to connect a mobile phone with the wireless carrier of their choice.
Offering more options
Google intends to stamp its own brand on the Nexus One and sell it directly to consumers over the Web, leaving it up to the buyers to pick their own carriers, according to reports published in technology blogs and major newspapers. That could open new possibilities while igniting new tensions in the mobile phone market.
For the first few months at least, the Nexus One will only work on GSM networks — a limitation that means buyers in the U.S. will have to use T-Mobile USA if they want the handset for high-speed Web surfing. Consumers willing to enter into a two-year data plan with T-Mobile will be able to buy the Nexus One for $179, $20 less than the top-of-the-line iPhone with an AT&T subsidy.
The technological barrier also precludes the initial version of Nexus One from working on the U.S. wireless networks of Verizon Wireless and Sprint, though Google plans a version that will work on those carriers' CDMA technology this spring and Verizon Wireless plans to subsidize that. For AT&T, the phone's compatible only with its slower wireless network instead of the 3G one used by the iPhone.
Yet Google appears to be betting that the Nexus One will make a big enough splash to persuade other major U.S. wireless carriers — AT&T Inc., Verizon Wireless and Sprint Nextel Corp. — to subsidize the device, too, said technology analyst Rob Enderle.
"If enough customers want this phone, the carriers will have no choice but to follow," he predicted.
That would also break the traditional practice of giving carriers the right to sell specific models exclusively for a certain period.
A smart phone that empowers consumers to choose from a variety of carriers could post a threat to the iPhone, which is tied exclusively to AT&T in the United States. That tie-in has spurred complaints from some iPhone users who say AT&T's network bogs down amid heavy Web traffic, particularly in big cities such as New York and San Francisco.
With the competition between the two companies heating up, Google Chief Executive Eric Schmidt resigned from Apple's board five months ago.
The Nexus One should work with many carriers abroad, as GSM is the predominant technology used. Vodafone's wireless service in Europe also will begin to subsidize the Nexus One in the spring.
Selling its own phone could foster more resentment toward Google among the business partners that have been backing Android as a viable alternative to the mobile operating systems made by Apple, BlackBerry manufacturer Research in Motion Ltd. and Microsoft Corp.
Verizon, for instance, has raised consumer awareness about Android during the past two months by bankrolling a marketing blitz for the Droid phone made by Motorola Inc.
In an effort to keep the peace, Google probably will try to position the Nexus One as a way to encourage even more innovation with its Android system, said Forrester Research analyst Charles Golvin.
"They might tell everyone in the Android ecosystem, 'We applaud you for what you have done so far, we just want to take things even further and think we can help light the way,'" Golvin said.