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Android's Data Impact

Google (Nasdaq: GOOG)'s move into the mobile world with the Android platform throws up some interesting new questions in the wireless business.

Apple's iPhone launch this year has shown that the public will buy into hip tech brands that go mobile and that can help up carrier subscriber and average revenue per user numbers. These are both metrics that Wall Street likes to use as a barometer of a carrier's health.

Google's move, however, emphasizes the open nature of phone software and -- eventually -- could promise far cheaper ad-supported voice and data calls. The search giant has said that carriers using the phone software will be able to lock the handsets. Users in the U.S., however, are getting savvier about locked handsets -- witness the recent annoyance over the 'bricking' of unlocked iPhones -- and Google's promotion of the system as open-source will set expectations even higher. (See Google: Android's Not Evil.) Google's U.S. carrier partners in its mobile alliance, Sprint Wireless (NYSE: PCS) and T-Mobile US Inc. , tend to be a little more liberal in their locking policies than larger rivals AT&T Inc. (NYSE: T) and Verizon Wireless anyway. Sprint and T-Mobile must be betting that they will get some of the 'iPhone effect' in sales and market-awareness when handsets using the Android platform are launched. Even if the platform is open they will likely see some benefit in subscriber numbers and -- potentially -- some boost in average revenues per user.

It is the revenue-sharing agreements that will be key to the whole venture for the mobile carriers. The phones themselves are going to be inexpensive, ad-supported calls will slowly drive the cost of voice traffic down, and the carriers have to be betting that the software will drive up data usage on the phones and allow them to derive some small value from ad-supported voice calls. It is likely, of course, that the revenue agreements themselves will be the most secret part of this open venture.

Data revenues are already growing fast anyway so it may not be too much of a big bet. Verizon Wireless reported recently that data services made $2 billion in its third quarter this year or 20 percent of its service revenues for instance.

Certainly, operators can't rely on ever-declining voice revenues. Without the potential of some revenue from the ad-supported calls, carriers face the possibility of cheap call services like Skype Ltd. getting ever more mobile. In the UK, Three UK has already tried to address this by launching its own Skype handset. (See 3 Launches Skypephone.)

— Dan Jones, Site Editor, Unstrung

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