If Google Sells A Smartphone: Cagey or Crazy?

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The idea that Google is going to be selling wireless handsets--Googlephones--proves the company is either a) very cagey or b) going nuts. Which is it?

My pal Harry McCracken does a good job of presenting the story: An analyst, supposedly with the inside scoop, says Google will release its own Android handset before the end of the year. The smartphone would be sold unlocked, allowing it to run on the AT&T or T-Mobile networks in the U.S. and other networks globally.

The reasoning behind this is solid: Google wants more control over how its services are integrated with smartphone hardware.

Harry does not think Google is getting into the phone business, but wishes it would. I do not know whether to rumor is true and can make equally valid cases both for and against.

Here goes:

Google wants more control over hardware

Pro: Microsoft has never turned Windows Mobile into anything, in part, because the hardware has not been anything special. Google thinks it can do better and, perhaps, suspects that handset manufacturers are not as smart as Google, which wrote the Android OS and created services the phone will run. This is the "Motorola, Nokia, etc., are clueless" part of the argument.

Con: Who wants to create a handset if you have to compete with the OS and primary apps provider? This could be why Microsoft itself is not in the handset business. Will manufacturer support for the Android OS diminish if Google itself is selling phones?

There is also Apple to consider. Yes, it writes its own OS and designs its own hardware, but it also has done an excellent job of incorporating Google services into the iPhone.

Maybe other handset companies can mimic Apple's success and learn how to better integrate the hardware, software, and services that make smartphones special. We will all be watching the Verizon Droid for an answer.

The supposed phone is supposedly being sold unlocked

Pro: This is intended to help customers avoid being locked-in to a carrier when they purchase a handset. It is an excellent idea, but not something any one vendor wants to do in the U.S market. Why? (Keep reading)

Con: Most U.S. residents buy handsets that are sold inexpensively or even given away. This is possible because a large part of the hardware cost is "hidden" in the monthly cellular service fee.

The unlocked Googlephone will not be carrier-specific, will not get a big subsidy from a carrier, and will seem very expensive to consumers. Especially if the carrier does not rebate the usual subsidy back to the customer in the form of lower monthly charges. I am not holding my breath on that one.

Android is finding some momentum

It is interesting that this rumor appears at the precise moment when Android is getting interesting and Android smartphones are finally hitting the market in decent numbers.

If the Verizon Droid is as cool as the commercial makes it sound, why does Google need to enter the handset business?

There may have been a time when a Googlephone made sense, but it was months ago, not now. Google can reconsider if all those new Android models have a chance at finding a market and fail.

Google has lots to do without selling phones

The difference between Apple and everyone else who sells a smartphone is the ecosystem built around the iPod and iPhone. No other vendor comes close to matching it.

Google would be better off concentrating on building music and app stores, modeled after Apple. Those are Apple's no-so-secret weapons and until Google can really compete, there is nothing to stop the iPhone.

Which is it?

Maybe the smartphone marks the decline of the wireless hardware vendor and rise of the OS and applications provider. The iPhone seems to prove this. Maybe the only company that can make Android a hit in the marketplace is Google itself, by selling hardware it designs.

That is the "Google is cagey" argument.

Alternately, perhaps Google will get into the handset business and the other handset companies will run away, leaving Google alone with a loser phone and a not-very-exciting ecosystem on the edge of extinction. Almost like Microsoft, but for different reasons.

That's the "Google is nuts" argument.

I am not sure where the truth lies. It is certainly possible that Google will do a smartphone of its own. There are reasons why it makes sense and why it does not. My reflex answer is that Google will not do it, but the company does need another big business to dominate and maybe smartphones (and netbooks) will be it.

I am 60/40 against a Googlephone being introduced this year, but also would not be terribly surprised if Google does one. I just wonder how they can turn it into a real success with customers.

David Coursey tweets as @techinciter and can be contacted via his Web site.

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