Google, T-Mobile unveil $179 G1, challenge iPhone

T-Mobile USA Inc showed off the first mobile phone to run on Google Inc's Android software in New York today, challenging the iPhone and BlackBerry.

The G1, which has a touch screen and a slide-out keyboard, goes on sale in US stores Oct 22, the companies said. The device will cost $179 with a two-year contract, compared with $199 for Apple Inc's iPhone 3G, which uses AT&T Inc's network.

T-Mobile, whose subscriber network is less than half the size of AT&T's, is unlikely to match the debut of the iPhone. Google's G1 may appeal more to technophiles than the average consumer because of its open-source platform, which allows anyone to develop programs for the device.

“Most consumers tend to choose their carrier first, and then choose the device that the carrier offers,” NPD Group Inc analyst Ross Rubin said in an interview in New York. The iPhone “was unusual because it pulled customers to AT&T”.

The G1, made by Taoyuan, Taiwan-based HTC Corp, lets customers use Google applications to search the Web, get directions and read the news. More Android phones probably will debut next year, based on interest from carriers and developers, said Rich Miner, Google's manager of mobile platforms.

Google fell 87 cents to $429.27 at 4 pm New York time in Nasdaq Stock Market trading. The stock has dropped 38 per cent this year. Deutsche Telekom AG, the parent of T-Mobile, fell 10 cents to ¤10.59 in Frankfurt.

Media Player: The G1 has a media player that connects to Amazon.com Inc.'s music Web site, similar to Apple's online iTunes store. The phone has some limitations compared with the iPhone, as the address book and calendar synchronise only with Google's programmes, the Wall Street Journal's Walter Mossberg said in a blog post. Nevertheless, he praised the software as “quick and responsive”. He plans a full review of the phone later.

T-Mobile, the fourth-largest US carrier after AT&T, Verizon Wireless and Sprint Nextel Corp, probably will sell fewer than 500,000 of the phones after they're released in the fourth quarter, analysts say.

Apple sold more than 1 million iPhone 3Gs in the first three days after their July debut.

Apple succeeded in luring customers away from other networks by making the phone's advanced features more accessible to mainstream users, Forrester Research Inc analyst Charles Golvin said. He predicted the G1 wouldn't sell more than half a million units if it debuts near the start of the quarter. That prediction isn't too optimistic, T-Mobile Leslie Grady said in an interview.

Google, owner of the world's most-used Web-search engine, aims to capitalise on that popularity in mobile devices, whose ad sales may double in the US in the next year. Users must have a Google account to operate the phone.

Surging Ad Sales: The G1 will use a Web browser that is similar to Google's Chrome, introduced this month to take on Microsoft Corp.'s Internet Explorer program. US sales from search ads on phones may rise to $181.1 million by next year, according to New York-based research firm EMarketer Inc.

“Wireless Internet access will be the most important and prevalent way that people access the Internet within three to five years,” said Jeffrey Lindsay, an analyst at Sanford C Bernstein & Co in New York. He has an “outperform” rating on Google's shares, which he doesn't own. “Any player that has a longer-term strategic vision has to get into that space.”

Existing US T-Mobile customers can pre-order the G1 starting today, T-Mobile Chief Technology Officer Cole Brodman said at a news conference. The device will go on sale outside of the US starting in November, becoming available in the UK then and across Europe in the first quarter.

Targeting Consumers: “US consumers overconsume everything; we love that about them,” Brodman said. “What's really been lacking is a compelling set of applications and devices.”

Google formed the Open Handset Alliance in November to develop Android, working on the software with carriers T-Mobile and Sprint, chipmaker Intel Corp, and mobile-phone manufacturer Motorola Inc AT&T and Verizon aren't members of the Android group.

Android is based on the free Linux operating system and is open to any programmer who wants to develop features for wireless devices. Software developers can build custom applications to run with the programme.

By offering code anyone can use, Google is seeking to break the hold phone companies have over the kinds of applications that run on their devices.

Research In Motion's BlackBerry led the US smart-phone market last quarter, with more than half of sales, according to research firm IDC in Framingham, Massachusetts. Apple's iPhone ranked second, followed by Palm Inc.'s devices.