Google hits a snag in China as world's largest carrier hijacks Android

Google is famous for touting its adherence to open standards and for developing on top of Open Source software platforms such as Linux. Launching Android, Google (GOOG) stated its new operating system would be open sourced -- that is, the software code would be free to download, modify and change. Such a laissez faire approach does make it possible for others to develop versions of Android that are not completely compatible. Thus far, this has not been a problem, with one enormous exception: China Mobile (CHL).

China Mobile, the world's largest mobile phone company with over 300 million subscribers, took Google at its word and decided to adopt the core software of Android for its own OMS operating system. China Mobile is now well on its way to building a code base that is different from the versions of Android being built by Google itself. And more than any other carrier on Earth, China Mobile can cause a code fork problem that could short circuit Android growth in the Middle Kingdom -- by far the largest mobile market on Earth.
Google has not publicly expressed any concerns. But China Mobile's subscriber base is gigantic enough that China Mobile could hijack Android and create a separate forbidden kingdom running inside China Mobile, complete with Android applications customized for OMS that do not work on any other handset. "China Mobile has more subscribers than there are people in the U.S. They can build their own ecosystem, their own modern version of a walled garden. I don't think anyone else will do that," says Deutsche Bank wireless and GPS analyst Jonathan Goldman.

Goldman has become increasingly sanguine regarding Android's prospects, citing dramatic improvements in the look and feel of the operating system as well as the proliferation of hot handsets now popping up running Android. That sentiment appears warranted. A report out of mobile advertising network AdMob (which was acquired by Google) found that Android phones had vaulted from nowhere to holding the second place in terms of time spent online among phone operating systems. Android, with 20% of total mobile Web traffic in the U.S., lagged only Apple's iPhone operating system. Mobile Web traffic is the key metric as most of the revenue growth for carriers is coming from online data services, mobile applications, and other data-oriented services as opposed to legacy voice operations.

Goldman is doubtful that China Mobile will be a model that other carriers will be able to follow. The sheer girth of China Mobile is so much greater than any other carrier that building a walled garden would prove extremely difficult due to lack of economies of scale. That said, China represents a critical growth market for Google. Company CEO Eric Schmidt has time and again highlighted the importance of China in the future of the technology industry. With over 1 billion people and a fast growing economy, China could provide a huge boost to Google's bottom line as growth in Google legacy businesses slow in the U.S. in and Europe.

And in China, the handset and mobile search market is likely to be more important than the PC market. Most Chinese use their phones in a manner similar to the way Americans use PCs, and handsets are the primary connectivity device for Internet browsing. Even if many Chinese opt to buy iPhones and run them on the China Mobile network illegally (a common practice), over time it's safe to assume that China Mobile will be able to offer more competitive products. With a dominant market share, China mobile could effectively hijack Android in China and in the process short-circuit Google's hopes of grabbing big advertising dollars from rapidly gentrifying Chinese consumers.

Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at
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