Heaps of articles, blogs and videos etc. etc. etc. has already been written about this subject and i am not sure that i have anything to add in this. However, i think it is a truly interesting topic and i am not sure i completely understand why Google wants to create their own framework that will have some serious issues before it matures and reach a level where it can successfully compete.
If Google wants to go Mobile, which they already begun with search, gmail, etc., there are many ways to do so. If Google wants to address the vast market of India, China, South East Asia, Latin America, etc. where PCs are far from prevailing and Google is hardly known, going for a Linux-Java based operating system and framework is probably not the right move either. The cost factor for these phones will not be in sub-$100, at least for the foreseeable future.
Creating a framework from scratch, even with deep pockets like Google has, is not done overnite. The first version of Android SDK was just released in a pre-alpha release. Commercially, Android/Google hopes it is going to be released next summer (2008). However, Symbian and S60 with Nokia as a very strong backer and extremely in-depth knowhow about phones, spent 5-6 years before it become mature, fast and easy to use. Trolltech released Qtopia Phone Edition back in 2004 and it was based on a mature toolkit (Qt/E) and Trolltech recently released its 3rd generation of the platform, 3 years later. Microsoft spent thousands of people working closely with TI and Intel many many years and invest hundreds of millions of dollars, and many years. WinCE 6 is now in shipping phones and only after 4 generations of software, they seems to be closer to get it right. But the phones are still expensive and it is not only the royalties to Microsoft that makes it expensive - hardware, R&D and marketing are also factores to consider.
Throwing good and a lot of money may not always help. And I think that Google/Android will realize that soon. LGE, Samsung and Motorola will probably not invest the hundreds of people for 2-3 years to complete the platform. The Alliance will not do so either, many of the crucial software companies are not in there. So the question is, will HTC be able to do so? and risk their 8 years of close symbiotic relationship with Microsoft? i doubt that.
Then a quick philosophical touch about Open Source. This alliance seems rather to be canabalizing on Open Source, since Google is determinating the conditions that the alliance partners can participate. The software will partially be licensed under an Apache license but be heavily restricted by Google in trademarks, certification and other means - far from the spirit of open source. Furthermore, the open platform seems only to accept a version of Java for 3rd party apps, which is not always a great mean to stimulate applications - though Google is trying to buy a community.
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