The entrance in 2007 of Apple and Google into the cell phone business is causing major upheavals. For one thing, Apple fundamentally changed the balance of power  by extracting a hefty revenue-sharing deal with AT&T and its other exclusive carriers in Europe.
For another, Google's Android promises to be an open platform for new devices and applications, a move that threatens the current model of proprietary phones tied to service contracts with the carriers. And Google's participation in next month's auction of 700-MHz spectrum could make the search king a player in the delivery of wireless services.
None of this is sitting particularly well with the No. 1 handset maker, Nokia.
Android Vaporware?
Between the iPhone and Android, Silicon Valley envisions a world in which mobile devices are used as much for Internet access and data -based applications as for voice and text messaging. But in an interview with the International Herald Tribune, Nokia CEO Olli-Pekka Kallasvuo spoke of the coming industry "convergence" with alarm and disdain.
"It's very clear that Apple, Google, and other players are bringing in a lot of new directions," Kallasvuo said. "Convergence is a nice, dandy word, but it means industries colliding."
As for Android, Kallasvuo accused Google of hawking vaporware. "We've seen an announcement," he said. "Conceptually, we could have made that announcement a long time ago."
Open Challenge
Apple's iPhone and iPod touch devices are Wi-Fi-equipped, and the iPhone's ability to run third-party applications via the Web or natively -- after Apple releases a software developer's kit in February -- is a big part of the phone's appeal.
Google's moves with Android and spectrum similarly push the smarts away from the network , turning phones and the network into an open platform on which thousands of services and applications can bloom.
Nokia is responding vigorously to these challenges by loading its phones with multimedia technology that is tied to revenue-producing services. "Nokia is responding more aggressively than any other vendor to the challenge," said Carolina Milanesi, an analyst with Gartner.
Fighting on Google's Turf
For one thing, Nokia is pushing location-based services aggressively. It bought digital-mapping company Navteq for $8.1 billion and plans to roll out location-based services through 2008. Nokia appears ready to challenge consumers' reluctance to turn phones into mobile tracing devices.
Nokia also plans to push its own music store to go head to head with Apple's iTunes and unveil phones designed to compete with iPods as music players.
Whether these moves will allow Nokia to succeed in the mobile environment remains to be seen, Rob Enderle, principal analyst with the Enderle Group, said in an e-mail. "Google has the advantage of being a services company while Nokia is a hardware company and doesn't yet fully understand services," he said.
"In the end, this is still Nokia's business to lose, but Google is going to do its best to ensure Nokia loses it," Enderle said. "Google is a services expert. They are fighting on their turf using their rules and no matter how big you are, if you are forced to fight the other guy's game on his turf, you will likely lose."
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