Google's free spirit


After months of rumors, Google is reportedly closing in on the worldwide launch of its branded handset, the so-called gPhone. Internet speculation went into overdrive during the holiday weekend, capped off by a Boston Globe article running down some of the Beantown area entrepreneurs and VCs with up-close glimpses of the gPhone prototype. (Boston is the home of mobile software startup Android Inc., which Google acquired in August 2005--according to the Globe feature, Android co-founder Rich Miner is the Google exec in charge of the gPhone project.) One unnamed source suggests the gPhone is "simpler" than the iPhone, with three-dimensional, animated on-screen buttons and a small QWERTY keyboard similar to a Treo or BlackBerry device. Another source says the phone will boast GTalk software, enabling VoIP capabilities. Still another source says that Google is seeking to create distribution partnerships with a number of different mobile carriers, avoiding an exclusive deal a la Apple's agreement with iPhone partner AT&T; insider buzz suggests the search giant is already in negotiations with T-Mobile USA and Verizon Wireless.

Various reports suggest Google plans to invest roughly $8 billion on the gPhone and related mobile initiatives--The Wall Street Journal previously reported Google has invested "hundreds of millions of dollars" into the project. During a keynote appearance at the Progress & Freedom Foundation's recent Aspen Summit, Google chairman and CEO Eric Schmidt acknowledged the company would "probably" participate in the FCC's upcoming 700 MHz spectrum auction--the company earlier said that it would potentially bid up to $4.6 billion in the auction if the FCC would enable open applications, open devices, open wholesale services and open network access.

When you start connecting the dots, it seems that the gPhone may not revolutionize mobile hardware or software so much as it promises to rewrite the economics of doing business in the mobile marketplace. Think back to comments made by Schmidt last November following a speech at Stanford University, when he argued that advertising assumes a greater role across the mobile ecosystem, consumers should receive their handsets for free. "It just makes sense that subsidies should increase" as mobile advertising grows, Schmidt said. Google already derives almost all of its revenues from web advertising--would the company sacrifice handset sales or even voice and data revenues to capture its share of the mobile consumer population? Here we all thought the "g" in gPhone stood for "Google"--maybe it really stands for "gratis." -Jason