Silicon Valley is causing a stir in the wireless industry

Mobile phones

From iPhone to gPhone?
Sep 13th 2007 | SAN FRANCISCO
From The Economist print edition




JUST 74 days after launching its iPhone, Apple said this week that it had already sold 1m of the things—a milestone that its previous blockbuster product, the iPod, took almost two years to reach. Its appetite thus whetted, Apple has now cut the iPhone's price from $599 to $399 in a bold grab for the mass market. And yet, to judge by the industry's chatter, the iPhone is already old news. More excitement swirls around rumours that Google, the web-search giant that is Apple's neighbour in Silicon Valley, could enter the market with its own “gPhone”. Google's boss, Eric Schmidt, has already said that the firm plans to bid for a prime slice of American wireless spectrum in a forthcoming auction, something Apple is also said to be considering. In short, both mobile operators and handset-makers could soon be confronted with two of the world's sexiest brands as direct rivals.

Publicly, Apple and Google are being diplomatic so far. The industry is a stool with three legs—network service, devices, and the software and content that goes on them—and “I don't think any player in the ecosystem trying to glue it all together will be very successful,” says Dipchand Nishar, who leads Google's mobile-phone strategy. By this he may simply be conceding the obvious, which is that Google would not build hardware, even if it made the other two legs. (Previous rumours that Google would launch a low-cost personal computer proved to be unfounded.)

But Google seems to be up to something. It bought a company called Android in 2005 that specialises in mobile-phone software. It has Google Talk, a free internet-calling service. In July it bought GrandCentral Communications, a firm that gives users one single phone number for life. And it recently filed a patent application for a new mobile-payment technology.

It would certainly be tempting to tie all these bits together into a new software “platform” for mobile phones and offer it to handset-makers as an alternative to existing smart-phone operating systems such as Symbian, Palm or Microsoft's Windows Mobile. Naturally, Google's search, e-mail and document services would be tightly integrated, along with its advertising technologies, which might pave the way for mobile service that is partly or wholly subsidised by advertising.

As a strategy, this might be just different enough from Apple's to assure harmony with its ally. Mr Schmidt sits on both companies' boards, as does Arthur Levinson, the boss of Genentech, a biotech firm. Google also supplies map and video software for Apple's iPhone. It would suit neither firm to open hostilities. So Google may concentrate on software for cheaper, mass-market devices, leaving Apple to make elegant, high-end hardware.

Hardware aside, the more intriguing possibilities concern the spectrum auction. Next year America's Federal Communications Commission (FCC), the telecoms and media regulator, will sell a band of radio wavelengths that will become available in 2009 as television broadcasters migrate from analogue to digital technology.

The usual buyers for such spectrum would be America's existing telecoms operators, such as AT&T and Verizon. Their “walled garden” model does not allow consumers to choose among handsets, operators and software applications, or even to roam around the open internet. In July, however, Mr Schmidt sent a letter to the FCC in which he pledged to enter the bidding, provided the FCC forces any winner to open up the new network.

The FCC accepted some but not all of Google's advice, so the winner will have to give consumers the freedom to choose handsets and applications. Mr Schmidt declares himself happy enough and says that Google will “be a player in some form”, either alone or in concert with partners. Such as Apple, perhaps?