Google Inc. on Tuesday showed off a cellphone that could provide the first real challenge to Apple Inc.'s iPhone: a mass-market device with a sharp touch screen and slide-out keyboard that brings the experience of mobile Web surfing closer to that of a personal computer.

When it starts selling in U.S. stores Oct. 22, the $179 G1 from HTC Corp. will be the first of many expected gadgets, from a wide variety of manufacturers, that run Google’s new Android mobile operating system and have many of the Internet giant’s services built in.

The G1, which works on the T-Mobile USA network, marks another salvo in the intensifying cellphone wars as tech titans try to upend the wireless market and seize a major business opportunity.

The likes of Google, Apple and Microsoft Corp. are betting they can make billions by selling software and delivering ads for the new generation of increasingly powerful mobile devices.


“The cellphone is the world’s most popular device, and it is going to be the world’s most popular way to access the Web,” said Ross Rubin, an analyst at NPD Group.

For the tech giants, staking a claim on the mobile Web is vital. Cellphones outnumber personal computers roughly 3 to 1.

When it comes to connecting people to the Web, phones are still far behind computers. But the iPhone, BlackBerry and other so-called smart phones are changing that. Research firm IDC predicts that by 2012, more mobile devices than computers will be used in surfing the Web.

These gadgets could be lucrative vehicles for advertising, particularly ads that alert phone users to shops and services near their precise locations.


Google executives predict the company will eventually make more money on the mobile Web than on the traditional Web. Investment bank Collins Stewart says it expects the search giant to add $5 billion in revenue from cellphone ads by 2011.

The G1 connects to Wi-Fi hot spots, features a keyboard and trackball and even has a compass, so when a user looking at Google Maps turns, the image does too.

But analysts say HTC and T-Mobile lack the marketing firepower to conquer the smart-phone market. The BlackBerry, made by Research in Motion Ltd. and supported by all the major wireless carriers, dominates the corporate side of the market, while Apple’s iPhone, which runs on the No. 1 AT&T; network, is a consumer hit.

But Google, based in Mountain View, Calif., hopes this is just the beginning. Manufacturers such as Samsung and Motorola Inc. are also working on phones that run the Android operating system, for carriers including T-Mobile and Sprint Nextel Corp. Sprint and China Mobile were supposed to launch Android phones in coming months but hit snags.


“We set out to build Android so that we could enable a lot more people to access the Internet,” said Andy Rubin, Google’s senior director of mobile platforms. “We want to make the entire Web experience as good as possible on the small screen.”

T-Mobile, the No. 4 U.S. carrier, raced to become the first provider to release a Google-powered phone to help it better compete against AT&T;, Verizon Wireless and Sprint.

“We tried to build a mass-market device that is affordable to consumers,” said Cole Brodman, T-Mobile’s chief technology and innovation officer. “We think it has got universal appeal.”

If Brodman is right, “Android could be a threat to all,” said Needham & Co. analyst Charlie Wolf.


It was Apple, not Google, that incited the big revolution on the tiny screen when it launched the iPhone in June 2007.

In addition to making calls, the iPhone lets consumers send and receive e-mail and instant messages, play music and videos and surf the Web.

Brent Bushnell, who works for a Los Angeles-based software company, recently landed in Boston and jumped on a train without thinking. He pulled up a map on his iPhone to figure out where he was headed and find his hotel. “I bootstrapped my way without missing a beat,” he said.

Apple started another iPhone bonanza in July when it opened an online store for downloadable programs. Since then, the Cupertino, Calif., company has sold or given away more than 100 million games, music programs and other applications for the iPhone through its App Store.


“Consumers have benefited tremendously from the iPhone’s introduction,” said Ford Cavallari, a partner with Monitor Group, a consulting firm. “In making this effort, Google is going to make it an even better marketplace.”

A key part of Google’s strategy, like Apple’s, is to spur innovation by giving software developers a shot at making applications.

In the past, wireless carriers set the rules and negotiated fees for software developers to gain that kind of access, but competition has forced carriers to open up.

Developer Steve Demeter has made $250,000 selling Trism, the iPhone game he created, so he quit his job programming ATMs for Wells Fargo Bank.


But he doesn’t plan to make the game for Android-powered phones, preferring what he called Apple’s “stringent quality control” over Google’s more open system.

But Don Park, an independent developer in Portland, Ore., said he would focus on Android phones for his location-tracking software because he likes that openness.

“Phones weren’t interesting a few years ago,” he said. “Now cellphones have become the new personal computer.”

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