Google Phone Plan
Draws Interest

By AMOL SHARMA

Google Inc. is in advanced talks with two top U.S. cellphone operators, Verizon Wireless and Sprint Nextel Corp., about selling handsets tailored to its new mobile-phone operating system, people familiar with the matter said.

Deals with the carriers would represent a major breakthrough for the Internet search giant, which until now has encountered wariness from some quarters of the wireless industry about its mobile-phone plans.

Within two weeks, Google is expected to announce new software and services that handset makers could use to build customized Google-powered phones. The company needs wireless operators to sign on to the project in order to get its mobile devices in front of consumers by the middle of next year. Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, and Sprint Nextel are both in advanced discussions with Google, the people familiar with the talks said.

A Google technology partnership might let the carriers offer cheaper phones, because Google's licensing fees for its software and operating system would likely be less than the industry standard. The phones also would be open to third-party application development, potentially spurring development of new features.

The deals would give Google an extensive reach for its new platform in the U.S. market. Verizon and Sprint are the No. 2 and No. 3 U.S. carriers by subscribers, respectively. Google had already made significant progress in recent months with another major U.S. operator, Deutsche Telekom AG's T-Mobile USA Inc. It isn't clear what progress Google has made with AT&T Inc., the largest U.S. carrier, with 65.7 million subscribers.

A Verizon-Google alliance would be particularly surprising, given how the two companies have sparred recently. Verizon has fought Google's efforts in Washington to force wireless carriers to open their networks to more services. The wireless carrier tried to overturn rules that Google had successfully pushed through the Federal Communications Commission relating to a coming radio-spectrum auction. Last week, however, Verizon dropped its appeal of the FCC rules. It was unclear whether Verizon's decision was connected to discussions now under way with Google. A spokesman for Verizon said there was no link between any discussions with Google and the lawsuit.

Sprint has generally been an industry leader in the development of applications for phones, such as mobile video and music, so partnering with Google is more natural. The company already is working with Google on software for devices that will run on a new high-speed WiMAX network that Sprint is building. Sprint is struggling to rebound from a period of sluggish subscriber growth that resulted in the ouster of Chief Executive Officer Gary Forsee, so any new handsets that can attract additional customers would help the company.

There is no guarantee Google will cut deals with any of the major operators. A Google spokeswoman declined to comment. The company will likely have to make compromises to win over the carriers.

Among the important issues for carriers to work out is how well Google's platform will protect consumer privacy and the security of phones, a person familiar with the situation said. Another concern is how Google and carriers will split future advertising revenue. Cellphone advertising is still a tiny market, yet wireless carriers see it as an area that could grow quickly in coming years and help offset declining voice revenue. Telecom executives are trying to avoid a repeat of what happened on the Web, when they were left out of the boom in online advertising revenue even though they provide the infrastructure that makes broadband connections possible.