• by Mark Walsh  @markfwal, September 24, 2008

Move over, iPhone--the Gphone has arrived. After months of Internet-fueled speculation and hype, T-Mobile Tuesday unveiled the G1 mobile phone powered by Google's Android operating system and bundled with Google software including search, Gmail, Maps, and YouTube.

With a large touch screen and a raft of features, the new phone takes direct aim at the iPhone--but will be priced lower at $179 when it goes on sale in the U.S. Oct. 22, with a two-year voice and data plan. Unlike the rival Apple device, it adds a slide-out Qwerty keyboard.

The G1 also comes loaded with a version of Amazon's digital music store offering more than 6 million DRM-free tracks to compete with music powerhouse iTunes.

At a splashy launch event in New York, however, executives from Google, T-Mobile and handset maker HTC of Taiwan emphasized that innovative new applications built on the open-source-based Android platform would be key to the device's success over time.

"We're going to embrace third parties that have really driven the creation of the Internet to create new compelling applications for the mobile Internet," said Cole Brodman, chief technology and innovation officer at T-Mobile USA.

T-Mobile joined with Google and phone manufacturers including HTC last November to create the Open Handset Alliance, an effort aimed at transforming the mobile landscape by promoting open standards and cross-platform development. In addition to T-Mobile, Sprint Nextel was the only other major U.S. carrier to sign on.

Neither Verizon Wireless or AT&T have ruled out developing Android phones, but Verizon is also working on a rival open operating system called Linux Mobile that it said in May would be the preferred software for its phones.

To help spur the growth of third-party applications, Google recently announced the Android Market, similar to Apple's App Store, where consumers can buy and download content for its mobile platform. Among the apps highlighted Tuesday was ShopSavvy, a comparison shopping tool involving use of the phone's camera, and Ecorio, which lets users monitor their carbon footprint.

With only 16% of U.S. mobile customers browsing the mobile Web, Google wants to use both its own Internet tools and outside applications to boost that figure and create a vast new audience for its ad-supported businesses. With the G1, mobile analysts suggested the search giant was off to a strong start in conquering the mobile Web.

Eric Bader, co-founder and CEO of mobile consultancy Brand in Hand said Android's open platform represents a "seismic difference" for an industry built on walled gardens and closed operating systems. "Android will lead to larger audiences and bigger reach, which is what media buyers have been waiting for," he said.

One of the biggest barriers to growth has been the need to develop content and ad programs for different platforms. "That forces working media dollars to be used in production and ad serving and kills ROI," said Bader, formerly managing director of MediaVest Digital.

Whether other carriers and handset will jump on board, however, is a big question. "Android is a platform which ideally should branch out beyond T-Mobile," said William Ho, a wireless services analyst for Current Analysis. "For me, the next thing to watch is what will happen with Sprint since they also signed up for the Open Handset Alliance."

For now at least, T-Mobile--the fourth-largest U.S. wireless operator--has gained unprecedented attention as the carrier offering the first Android phone. "It definitely raises T-Mobile's profile," said Greg Sterling, who leads the local mobile search practice for Opus Research. "It's a great sort of PR move for them."

Indeed, Brodman said the company was rolling out its biggest marketing blitz ever for a T-Mobile device to launch the G1. On a more technical level, T-Mobile is also rolling out a high-speed network nationwide to ensure fast, reliable Web browsing and back up all the hoopla surrounding the phone.

To that end, Brodman said the carrier's new 3G network is now live in 16 cities and will extend to 27 by mid-November, covering most major markets and 80% of its 30 million U.S. subscribers. The phone also offers Wi-Fi, Bluetooth and GPS capabilities.

While all the involved parties need to deliver on the G1's promise, Sterling said its success still rests mainly with Google. "If I had to single out one factor, the Google brand would be the biggest driver," he said.

Google's imprint is seen not just in the phone's name and its suite of popular programs like Gmail and Maps, but in a dedicated button for Google Search on the keyboard as well.

The link between the desktop Internet and the mobile Web was underscored in a surprise appearance at the press conference by Google co-founders Larry Page and Sergey Brin. "A big element of this is having computer-like functionality on a phone," said a G1-toting Page. "That means being able to run different applications and having an open eco-system ... to do really creative things."

He mentioned in particular the potential for location-based services, naturally suited to an on-the-go medium like mobile.

As smartphones increasingly turn into feature-laden mini computers, the G1 phone will compete not only with the iPhone but the BlackBerry, Windows Mobile devices, and a host of so-called iPhone killers from the major carriers.

But because the iPhone has set a new standard for user-friendly design and boosted mobile Web use, the Apple device is the one the G1 will most likely be judged against. Like the iPhone, Brodman said the T-Mobile device could be adopted by business users, but is mostly aimed at the wider consumer market.

Indeed, the G1 is not compatible with Microsoft Exchange, the suite of productivity tools featured on the business-oriented BlackBerry. "But that's a perfect opportunity for a third-party developer," said Andy Rubin, senior director of mobile platforms for Google.

And at $179, the G1 aims to undercut the iPhone's $199 price tag. The data portion of the service plan is only $25 per month for unlimited data, unlimited SMS, unlimited email, and 400 text messages or $35 for unlimited data and messaging.

"That's $5 less than Sprint's unlimited data plans and $5 to $15 cheaper than AT&T's iPhone 3G plans," said Avi Greengart, research director for mobile devices at Current Analysis.

In terms of the hands-on experience, Greengart said he found the interface to be well-organized and the touch screen "extremely responsive" following a demo on Tuesday. If not as elegant as the iPhone, the G1 maximizes simplicity.

Whether consumers respond as favorably remains to be seen. Research firm Strategy Analytics has predicted that the Gi could sell 400,000 units by the end of 2008, accounting for 4% of the smartphone market.