MediaBuyerPlanner: Google is in the middle of a mobile phone project, developing an operating system based on open-source Linux software, according to industry executives familiar with the project (via The New York Times).

The phone is not expected to rival the iPhone and, in fact, Google is not likely to make phones, itself. Rather, Google is creating software, hoping to persuade phone manufacturers to use it as an alternative to Windows Mobile from Microsoft and the other operating systems that are currently built into phones.

Unlike Microsoft, Google likely will not charge phone makers for a licensing fee for the software. Instead, the cost of the phones may be subsidized, in part, by advertising.

"The essential point is that Google's strategy is to lead the creation of an open-source competitor to Windows Mobile," one industry executive, who wished to be anonymous, is quoted as saying. "They will put it in the open-source world and take the economics out of the Windows Mobile business."

Phones based on the Google technology are expected to be available next year. The Gphone is an attempt by Google to extend its dominance of online advertising to the mobile internet. Applications currently being developed are expected to go beyond the mobile search and map software it offers today, to include, perhaps, a web browser to run on cellphones.

Google's success will depend in large part on its ability to sign deals with the wireless carriers.

Google's chief executive, Eric E. Schmidt, has said that the cellphone market is the largest area of growth opportunity for Google, though he wouldn't offer details on the project.

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