ANALYSIS
Anticipating Android: Will It Challenge iPhone?

Industry insiders who have worked on Google's Android mobile operating system say it will struggle in the near term to match the consumer enthusiasm generated by Apple when its iPhone redefined the touch-screen phone market and greatly improved mobile Web surfing.

Instead, Google sees Android as an open source platform for designing mobile devices, saying it will encourage innovation by allowing outside software developers to tinker with the system and create better mobile programs and services.

But these things take time and the first phone using Android, code-named the Google "Dream" phone, is unlikely to wow consumers. The device is made by Taiwan's HTC. Sources familiar with the plan say Deutsche Telekom's (NYSE: DT) T-Mobile plans to introduce it in New York on Sept. 23.

"I'm not sure the consumer experience is significantly better than that of the iPhone," says Rajeev Chand, a wireless analyst at investment bank Rutberg & Co., who has tried out an early version of Android. "When the iPhone came out the experience was several orders of magnitude better than anything that was out there."

Mobile Web Growth

Google, its partner carriers and application developers hope the Android platform will drive even more mobile Web surfing than the iPhone, which has helped Web usage rocket in comparison to other smartphones.

But unlike Apple, which keeps a tight grip on the iPhone's hardware and software, Google will have less control as Android will be open to developers to create component technologies in almost any way they can imagine.

Google's engineering-led culture appears content to launch the first Android phones as a kind of science project that will be rapidly improved afterward. Google has produced big hits and plenty of hard-to-remember misses with its strategy of launching new ideas and iterating quickly.

Yet, Google will not have the kind of leverage in mobile that it is used to in the PC world, where it dominates search. Phone carriers have a huge say over how devices are designed and what data services are accessible over their networks.

While Android could offer real promise in terms of technology and usability -- particularly because it is an open platform -- it is unlikely to single-handedly change the restrictive nature of the mobile industry, said John Poisson, founder of Tiny Pictures, a developer partner of Android.

"Carriers in each market will still control how it gets implemented and on which devices and in which form," Poisson said. "Android lives and breathes at the pleasure of the operator."

Brand Awareness

Another problem for Android is how to explain what it is to consumers. Unlike the iPhone, which came on the back of Apple's hugely successful iPod music player, Android is an unknown brand, even though the Google name has plenty of cachet.

"People forget these things get to customers through the retail channel and marketing," said Frank Meehan, the global general manager for handsets and applications for Hong Kong telecommunications conglomerate Hutchison Whampoa.

"We operators struggle with how to market this phone. There's nothing really unique about it and we can't say it's a Google phone," said Meehan, whose company buys millions of 3G devices year.

Despite the concerns, mobile industry executives say they welcome Google's entrance as its deep pockets will help meet the increasingly high expectations of consumers for mobile services.

From a developer's perspective, Android's advantages over the iPhone or Nokia's (NYSE: NOK) Symbian operating system is that it is open source, which means Google is sharing its software code and making it easier for third parties to develop compatible applications.

Who's In Charge?

Apple's second-generation iPhone applied the same strategy and offers more than 3,000 third-party applications through its App Store, but the company still retains some control.

"Android promises to be the most open platform for building mobile phone applications that we've seen to date because it's based on very familiar tools and technologies," said Jason Devitt, cofounder of Skydeck, a new service that will allow users to manage their cell phones over the Web.

Others hope that Google's entrance can galvanize mobile advertising, which is still in nascent stages.

"All these devices are resulting in better usage and that's what advertisers want and they're growing their spend," said Jason Spero, vice president of marketing at AdMob, a marketplace for mobile advertisers.

Google is hoping to generate revenue through its existing search advertising and related services by the addition of mobile to PC.

"Google's power comes from the freedom of choice, in terms of the component technology and services that can be laid on top," said Cheng Wu, founder of Azuki Systems, a mobile Web technology company.

"The only thing they want to control is the kernel of the operating system and the ability to data mine for search and advertising down the road."