Google, Apple and the Virtual Handset

Chances are you don't use, or know anyone who does use, Google Voice, the search giant's call management/forwarding service (formerly known as Grand Central). The service, though slick and useful, still flies under the radar for most users — even with its potential to wrest control of voice calling (not to mention voice revenues) from incumbent carriers.

But that's changing. After years of keeping the service in closed beta, Google finally released Google Voice to the public earlier this year. For the most part, the launch was another non-event, notable for early adopters but ignored by the masses.

But this summer, with the release of new mobile versions of Google Voice (along with plans to support number portability), things are starting to get interesting — and not surprisingly, given what's at stake, combative. The mobile application changes a mobile device's dialer, address book and short message service (SMS) to use Google Voice rather than the associated carrier service. Calls still eat up carrier minutes, but the app makes it look like the calls come from Google Voice, expanding use of the service and relegating the carrier to a dumb pipe — death in the mobile game, where branding and add-on services drive huge revenues.

Google initially released versions of the app for Android, BlackBerry and the iPhone, but Apple quickly pulled the application from its store. A minor melee ensued. Google CEO Eric Schmidt quit the Apple board (just how much the Google Voice hubbub played into that decision wasn't clear, though the timing was curious). And the FCC promptly sent off letters of inquiry to Apple, AT&T and Google to sniff out neutrality concerns.

Google Voice isn't the first app to commandeer a device's dialer. Apps from Skype, Truphone and others have taken a similar approach. And for users, such “virtual handsets” remain a clunky alternative — standard mobile voice and SMS remain the obvious choice for most users. But with such big players involved, so many mobile dollars at stake and the FCC taking notice, there looks to be the potential for a real firestorm here, not just smoke.