The Handset Supremacy: Google Android’s Mass Disruption

In case you hadn’t noticed, Google Inc. (GOOG) and T-Mobile USA have unveiled the G1 handset — the first to be built on the Google Android platform. The involvement of Google, with its brand equity and general master-of-the-Internet-universe profile, has managed to make that launch almost as buzz-worthy as the release of the iPhone a year and a half ago. Does the G1, with its touchscreen, application development ecosystem and Internet-optimized focus, mean that the iPhone finally has a significant competitor in the marketplace? Sure. Is the embrace of the open Internet indicative of a new page for mobility? Absolutely. Will cellcos have to learn how to leverage advertising? Well, duh.

Are these the most important conversations to have? Well, no.

Call it Rise of the Machines, if you’re feeling clever. Because the real point is, handset manufacturers are taking things into their own, er, hands, with the G1 launch being one of the largest pieces of evidence. For all of the lip service being paid to the open access/open device movement, the promise of mobile data communications is shaping up to be nothing like the wired Internet revolution. Because unlike the desktop or laptop, where a PC is a PC is a PC (or a Mac is a Mac is a Mac), in handheld wireless it’s all about the hardware and a plethora of closed operating systems optimized for specific stables of services. Carriers know this. Or if they don’t, they’re about to find out.

Handset+Service Hegemony

Put simply, the carrier’s importance is fading, compared with the influence of the handset. In a world with widely deployed 3G and several national carrier choices in any developed country one could visit, people are concerned with what’s in their pocket, not whose network it rides on. And the G1 has given legs to the idea that the most successful hardware offerings will be those optimized for off-deck services.

There’s been an ongoing shift in smartphones to go beyond business users to focus on the wider — and perhaps ultimately more lucrative — consumer market, for whom the smartphone is becoming more attractive thanks to the effect of the iPhone. AT&T Inc. (T), flush from its third-party application-heavy iPhone success, is focused on this rising importance of the handset and the need to offer consumer choice. In fact, AT&T spokesman Mark Siegel told xchange that the No.1 wireless carrier absolutely would consider bringing the G1 — or a similar Google Android device— into its portfolio. “People are now relying on wireless phones to manage their personal lives and their business lives; the device is the one truly essential piece of technology we have, and I don’t think I’ve overstated that,” said Siegel. “The wireless networks do need to be fast, reliable and ubiquitous, but the handsets themselves are key. They need good screens, an extended battery life and intuitive navigation. And they must be smart because we’re asking them to do so much now. People rely on mobility to manage more and more aspects of their lives.”

Consumers are much more persnickety than corporate users about their devices, which are seen as outgrowths of personality. But not just any sleek device with horsepower will do. The iPhone might have spawned a slew of competitive devices that imitate its thinness and touchscreen, along with cool differentiators of their own, but so far Apple Inc. (AAPL) has little to fear from the likes of the LG Voyager or Samsung Instinct. The key? Those aforementioned third-party applications. And so, enter the G1.

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