Google gets into phone business

Google Inc. muscled its way further into the mobile industry, unveiling its own branded mobile phone dubbed Nexus One and debuting a new online phone store through which it plans to sell the device and others directly to consumers.

The launch of Nexus One, a thin touch-screen device that runs Google's Android mobile operating system, thrusts the Mountain View, Calif., company deeper into competition with Apple Inc., which makes the popular iPhone.

But unlike Apple, which sells its devices through wireless carriers as well as through Apple stores and retail outlets such as Best Buy, Google is banking on a new business and distribution model to sell Nexus One. The device, built by partner HTC Corp., is being sold exclusively online and Google is lining up operators to offer wireless plans through its site.

Most U.S. consumers buy their phones from carriers like AT&T Inc. and Verizon Wireless who play a big role in designing devices and financing the marketing of them. The carriers also subsidize the cost for consumers, in exchange for getting them to sign up for service contracts.

Google believes that selling phones directly to consumers online will get mobile devices with more advanced features into the market faster and lower the costs of high-end phones over time, executives said.

Online sales of cellphones will change the business "just the way Web stores revolutionized the choice and cost of ... a digital camera," said Andy Rubin, a Google vice president responsible for Android.

Nexus One initially will be available without wireless service for $529 from Google's website, or for $179 with a two-year contract from Deutsche Telekom AG's T-Mobile USA. T-Mobile's plan costs $79.99 a month for 500 voice minutes and unlimited data and texting. The cheapest iPhone plan costs $69.99 for 450 minutes and unlimited data, with texting extra.

In 2008, Google, in conjunction with HTC and T-Mobile, introduced the first phone running its Android software. Since then, around 20 phones running Android software have been announced.

By creating its own online store and branded phone, Google risks alienating partner wireless carriers and handset makers whose cooperation it needs to continue to grow the number of devices running Android.

Google executive Mario Queiroz said the company kept looking for a way to better showcase new mobile technology and opted to design a phone loaded with features that push the limit of what a phone can do.

The Nexus One, which is as thin as a pencil and about the same weight as an iPhone, has features that aren't common in other phones. For instance, every text box on the phone is voice-activated, meaning consumers can dictate anything they would type on the phone.