Rumors fly as Google workers test new cellular phone


Google Inc. has been letting its employees test a new cellphone that could be rolled out to consumers as soon as next month, potentially marking its first foray into the business of selling mobile phones.

The Internet search giant already has its own Android operating system installed on phones sold by major wireless carriers including Verizon, Sprint and T-Mobile. But bloggers and recent news reports have raised the possibility that Google may sell its own “unlocked” phone -- one that could be used with more than one service provider.

Without a contract binding them to a single carrier, consumers could theoretically shop around for lower prices for their mobile phone service, and more easily jump ship if a better deal came along.


Other popular devices are available through only one carrier, so consumers interested in buying an iPhone, for instance, have no choice but to sign a multiyear contract with AT&T.

“When the carriers don’t have this false loyalty of the contractual obligation, they’ll have to focus on things that really deliver benefits to their customers,” said Charles Golvin, an analyst at Forrester Research.

But short-circuiting the contract model would come with its own set of challenges for Google. One perk of signing expensive contracts with carriers is the great deal consumers can get on a new smart phone. For example, the Motorola Droid, a popular new phone also powered by Google software, costs $200 when purchased through Verizon with a two-year contract. Without the contract, the phone retails for $500. To offer similar discounts on a potential Google phone, the company would have to find ways to offset the costs of producing the units.

If Google’s past strategies are an indicator, Golvin said, it might well look to advertising to keep its phone cheap. The company, which makes nearly all of its $22 billion annual revenue from its online ad business, is known for offering consumers free services -- Web search, online video, mapping -- and paying for them by selling their customers’ attention and interests to advertisers.

Last month Google paid $750 million to acquire Admob Inc., a maker of technology that integrates ads into thousands of mobile phone applications. Google’s Android operating system already runs on at least a dozen phones from manufacturers such as Motorola Inc., Samsung and HTC Corp.

But bloggers on Monday claimed it was HTC that would build the rumored “Google phone” now being tested by the Mountain View, Calif., company’s employees. Documents HTC filed earlier this month with the Federal Communications Commission show a new device called the Nexus One.

Those documents do not mention Google, however, and the company would not comment on the specifics of the new device.

Whether or not Google’s new phone changes the wireless industry overnight, the company’s interest in smart phones fits into its approach to an accelerating trend: In the months and years to come, customers around the world will be more likely to access Google’s panoply of features through their mobile devices, rather than through personal computers.