It is likely that T-Mobile will be the first U.S. carrier to bring a Google-powered cellphone to market. The two sides have been working together for several months to develop the specifications for a new device, which would be powered by the Google-backed Android open operating platform. The companies have declined to name the manufacturer of the phone, but most people in the industry suspect it is Taiwan's HTC Corp. The effort puts T-Mobile ahead of Sprint Nextel Corp., the only other U.S. carrier among the 33 partners Google announced last week in its push for open operating platforms for cellphones.
Cellphone carriers are always trying to update their handset lineups with snazzy new devices meant to lure customers away from the competition. But T-Mobile, of Bellevue, Wash., is fundamentally rethinking how it builds phones -- with an eye toward making high-end Web and multimedia features available on cheaper phones -- and the business models it uses to make money off them.
Let's dive into the reasons this partnership makes sense for T-Mobile. Google promises to be a key competitive differentiator for the carrier. T-Mobile is the smallest of the national U.S. carriers and unlike its bigger competitors it still doesn't have a national 3G offering. T-Mobile is also a consumer-only play, with little to no appeal to enterprise customers. That's good news since Android at this stage in the game has little to no appeal for business users.
So T-Mobile can work with Google to develop cool new mobile phone applications and ride the hype wave for little to no investment on its part. That's a pretty good deal, unless, of course Android takes away all of T-Mobile's power.
However, by acting now, T-Mobile might be able to avoid being completely disintermediated by Google. By being an early partner T-Mobile will likely be able to negotiate a cut of Google's mobile ad revenues sold over its mobile network. The carrier is also getting a significant amount of say into the development of Android (and other non-Google handsets):
The Google initiative is part of a new strategy at T-Mobile to be involved in the creation of phones from the ground up. Usually carriers pick from a slate of prototypes created by handset makers and customize devices to fit their needs. In the case of the iPhone, Apple Inc. designed the phone with minimal input from AT&T. T-Mobile, by contrast, wants to insert itself in the process early, much as Japanese carriers like NTT DoCoMo Inc. "I've always been jealous of how they can come to market with such a tightly integrated product," Robert Dotson, T-Mobile USA's chief executive officer, said in an interview several weeks ago.
Late last month, T-Mobile unveiled the "Shadow," an HTC device with a slide-out keypad that runs Google rival Microsoft Corp.'s Windows Mobile operating system. T-Mobile was in on the Shadow's development from scratch. The carrier asked Microsoft to make a series of changes to the Windows platform to make it easier to use for consumers -- including playing down lots of business-oriented applications, such as spreadsheets, and making it easier to access email services provided by Microsoft competitors like AOL and Yahoo. The phone was launched on Halloween for $149 with a two-year contract and rebate.
What do you think? Can T-Mobile work with Google to use Android to grow market share? Or is Android have the potential to be a Trojan horse with the promise to take down T-Mobile just as easily as it as Verizon and AT&T?