Google is the youngest of these companies and has probably the smallest patent portfolio, most of which isn’t mobile or telecom related. This puts Google and Android at a legal disadvantage and explains the 45 patent infringement suits that one analyst says Google in presently facing in the mobile area alone.

Google would have preferred to win the auction, but with the consortium sitting on more than $100 billion in cash, the outcome came down to determination, not resources. Google stayed in it only long enough to make sure of the consortium’s intentions and to make the purchase more painful for them, if that mattered.

It certainly mattered to Google, because that $4.5 billion number will be at the heart of the inevitable anti-trust lawsuit Google will file almost immediately. Every good anti-trust lawyer in America just cancelled his or her July 4th holiday to prepare their pitch for Google, which will probably claim Restraint of Trade as well.

Given that the courts will shortly be involved, Google can probably operate unfettered for another 2-3 years, during which they’ll try to build their own mobile patent portfolio. Google may well be able to use the courts to slow the actual Nortel transaction, too, according to my lawyer friends.

So the “Android is dead” story here is way premature.

In the long run, remember, Google will probably be able to use its legal strategy to force the consortium to at least license some or all of the patents. They’ll get a royalty from Google, I suppose, and thus benefit from Android’s success, but then Google is unlikely to be completely deterred, either.

The story everyone seems to be missing here is who gets what in this consortium deal? Most journalists and bloggers seem to assume the winners will all share equally in the IP spoils. But I have people who know people and the word I am hearing it that’s not the way the consortium works at all.

Some consortium members get patents, some get royalties, and some just get freedom from having to pay royalties.

Notice Nokia isn’t in the consortium? The Finnish company is apparently covered by Microsoft, tying Nokia even more firmly to Windows Phone.

Here’s the consortium participation as I understand it. RIM and Ericsson together put up $1.1 billion with Ericsson getting a fully paid-up license to the portfolio while RIM, as a Canadian company like Nortel, gets a paid-up license plus possibly some carry forward operating losses from Nortel, which has plenty of such losses to spare. For RIM the deal might actually have a net zero cost after tax savings, which the Canadian business press hasn’t yet figured out.

Microsoft and Sony put up another $1 billion.

There is a reportedly a side deal for about $400 million with EMC that has the storage company walking with sole ownership of an unspecified subset of the Nortel patents.

Finally Apple put up $2 billion for outright ownership of Nortel’s Long Term Evolution (4G) patents as well as another package of patents supposedly intended to hobble Android.

At the end of the day this deal isn’t about royalties. It is about trying to kill Android.

Note — Here’s a pretty good account from Reuters of the Nortel patent auction. You’ll notice they don’t include the participation breakdown of the winning bid (who gets what) that so far appears no place but here.

T-Mobile and AT&T are the USA’s only GSM wireless network operators, so if you had an iPhone and wanted to dump AT&T to allow things like free tethering, the obvious (and frankly only) way for Americans to do so was by jumping from cranky old AT&T to the much friendlier T-Mobile. And so tens of thousands — maybe hundreds of thousands — of AT&T customer did just that, and were gratefully accepted by T-Mobile.

But now with the T-Mobile brand, back office, and customer service likely to go away, will AT&T turn all those iPhones into bricks?  It depends in part on Apple, on the Apple-AT&T contract, but mainly I think it depends on terms set by regulators in return for approving the deal.

AT&T has said it will grandfather T-Mobile customers, honoring their often lower monthly fees and continued use of T-Mobile phones, but AT&T has had nothing specific to say yet about T-Mobile iPhones.

Apple hates jailbroken and unlocked iPhones, of course, and would like to see them all die, but since Verizon began selling iPhones in the USA, Apple has lost some clout with AT&T.

So my guess is that AT&T will allow jailbroken and unlocked iPhones to run on their network if the Federal Communications Commission or Federal Trade Commission or Department of Justice demand it as a condition for approving the merger, which they will if we demand it. And if that happens, the even more important question becomes whether Apple will lose some control of its ecosystem?  Will jailbreaking and unlocking — enabling iPhones to add software features and do things beyond the ken of Cupertino — become the norm?

I hope so.

Update — According to a report this morning in Forbes: “AT&T said Monday that it in the year after the closing, it plans to rearrange how T-Mobile’s cell towers work. The spectrum they use for third-generation services, or 3G, will be repurposed for 4G, which is faster.  That would leave current T-Mobile phones without 3G. They would need to be replaced with phones that use AT&T’s 3G frequencies. AT&T said it had factored the cost of replacement phones into the total cost of the acquisition.”

This would seem to suggest that AT&T will give you a free replacement for your jailbroken, unlocked iPhone on the T-Mobile network.

But wait, there’s more! If AT&T is repurposing T-Mobile 3G service to 4G, doesn’t that strongly suggest that 3G is going away completely on AT&T?  It looks that way to me. So will AT&T be giving EVERYONE a free 4G phone upgrade or just the jailbroken unlocked iPhones?

Ironic, eh?

A longtime reader checked-in today with one more story of Internet generational change.  We used to call it just disintermediation, but in its later stages this syndrome requires new consumers who may have never even visited a bookstore… or had to.

“The family went to Borders today to look for a book or two. The store is closing. I always liked that store on the Middle River in Fort Lauderdale; watching the boats go by as I read the paper.  Anyway we went, the lines were long in checkout, and the discounts were 20 to 40 percent. So I went to IT to wander around, found a few books, figured the 20-40 percent off scanned the bar code with my iPhone Amazon applet and bought with one click at Amazon. Even with the Borders discount Amazon was still cheaper.

Sorry Borders, I did like your coffee, but One-Click is one kick too much.”

I’m no tennis player, but my understanding of this tactic (rushing the net) is that you hit deep into your opponent’s territory using a lot of topspin to make the ball harder to return then run right up to the net and attempt to slam his return shot into the forecourt while your opponent is still in the backcourt and unable to reach the ball. The Nokia version of this tactic would be to introduce the best-ever Windows 7 Phone (faster processor, better screen, expanded services, competitive price) then simultaneously introduce  another line of Windows 7 phones that have 80 percent of that capability for 20 percent of the price.

Nokia has already lost the elites but they have to make a credible showing toward the top of the market to stay in the game at all. This is one of those instances, though, where the company really can make it up in volume. They have to essentially cannibalize their own feature phone business to save the smart phone business.

Think about it. The life expectancy of a mobile phone is 18 months, meaning phone users are literally forced to change on a regular basis, often switching platforms in the process. Even buying another phone from the same vendor is a decision because the phones change so much in that time. That’s what makes the mobile handset business such a bloodbath where Motorola can be on top one minute with its Razr then a dog the next with the same phone. Phones are getting ever more powerful, too, thanks to Moore’s Law and the many cloud services coming online. So a Nokia decision to lean-into smart phones at the expense of feature phones is really just a decision to accelerate the inevitable.

Feature phones have one generation left to live. Three years from now every mobile phone will be a smart phone.

To embrace this, however, means going aggressively down-market. Apple has done this with the $49 iPhone 3GS. Nokia needs to do the same thing only even more aggressively. They need a $29 smart phone.

Here is the transition we are likely to see. Cheaper smart phones are coming. There was a story just this week about Apple announcing a cheaper smart phone this summer. I can see it now: at the WWDC in June Apple will announce the expected multi-core, 4G, international-ready, whiter-then-white, 1.2-GHz iPhone 5, but the “one more thing” will be a repackaged, smaller form-factor, $29 iPhone 3GS. Nokia has to not only have a response to this move by Apple, they must preempt it with an earlier announcement of their own.

Nokia (and Microsoft’s) survival in the phone market is dependent on staking out the lower end of the market where people buy on price as much as features and brand loyalty is less of an issue. Apple is heading there and Android is there already. Only by rushing the net — by following the time-honored Microsoft technique of throwing bodies and staggering amounts of money at a problem in a market-changing way — can these companies remain relevant in the mobile space.

But they have only one chance to make it work and they’ll have to take that chance before June.

Steve Wozniak invented the Apple ][ disk drive with its Integrated Woz Machine (IWM) controller, which was revolutionary for its time. And unlike competing disk drives (these were floppies, by the way — hard drives and optical drives had yet to make it to PCs) the Apple drives had copy protection built-in. That is until Woz decided to defeat his own design by inventing the first nibble copier so he could copy his VisiCalc disks.

Competing floppies of the time used hard sectors determined by little holes punched in the disk. Copying those floppies was easy because it was simple to see where the sectors were. But the IWM ignored hard sectors completely, using its own sectoring scheme that could be varied by a command embedded on the disk and read by the IWM firmware. This copy protection was finally defeated by the nibble copier, which also ignored sectors and simply made perfect copies of an entire disk, one little nibble (half-byte) at a time.

Having invented the nibble copier, which was sold under the name Locksmith, Woz then went on to defeat it, again undermining his own design. His motivation in this case was two-fold: 1) to have fun, and; 2) to keep Locksmith disks, themselves, from being copied. He did this by embedding a sequence on the Locksmith disks that effectively said, “do not copy this disk.” It helps when you control both the software and the hardware upon which it runs, eh?

Eventually Woz and Henry Roberts developed a further copy protection scheme that hid the sector information in a pseudo-random number. That was about 30 years ago and last we heard Woz was trying to defeat himself again by using heat from a laundry iron to essentially push bits from one floppy through to another, again making a perfect copy.

Here is where we return to the present. Andy Hertzfeld, who told me this story, predicted that Woz would never be able to copy a floppy using an iron. But Woz has yet to capitulate on this, claiming that — 30 years later — he is still trying.

And so it is with me. I still believe the white iPhones will come from Verizon, but they’ll be LTE models that we’ll see later this year.

And speaking of the Verizon Long Term Evolution 4G network, customers are learning that it won’t support certain Cisco Virtual Private Network (VPN) devices. This came from a corporate Verizon customer now stuck with a boatload of useless Cisco gear and was confirmed by another such customer when I reached out last night.

Verizon engineers, by the way, say nothing is wrong. Now that pisses me off.

There’s this disconnect that takes place sometimes where users and service providers see a problem completely differently. In this case customers are clearly being inconvenienced yet Verizon engineers are saying, “no they aren’t,” which actually means, “there shouldn’t be a problem and if there is that problem is on the customer’s end, not ours.”

Who is right?

The customer is always right. If Verizon doesn’t get that, then Verizon is headed for trouble with all those dissatisfied iPhone customers they are expecting to grab from AT&T. Chronic complainers will be the first to jump ship.

Here’s the question nobody asked (but should have) at today’s Verizon iPhone event in New York: “Why don’t corporate VPN’s work on your 4G network?” Had someone asked that question I’d bet by Monday the problem would be fixed.

But since it wasn’t asked, Verizon will remain in denial until thousands of customers are inconvenienced and the carrier is finally forced to admit that yes, there is a problem.

No other explanation makes any sense.

Certainly there is no supply problem that could keep Apple from introducing a white iPhone.  But what if white is a Verizon exclusive in the USA?  That would to a certain extent pull the branding rug out from under AT&T and even put a bit more oomph behind those iPhone users who might choose to jump carriers.

It’s silly, I know, but as Mrs. Cringely always says, “Husbands die every day.”

Apple’s iPhone is coming to Verizon sometime early next year as AT&T loses its exclusive deal for the iconic smartphone. It could be as soon as January. Verizon will want to use this opportunity to grab disaffected iPhone users from AT&T because surveys have shown American iPhone users love their handsets, but not their carrier. So Verizon, which already appears to have the better network, will have to emphasize that advantage. I expect they’ll do so by making the iPhone their first Long-Term Evolution (LTE) 4G handset.

It’s the network, stupid. To get a big win from whatever huge amount Verizon is no-doubt paying Apple, the company has to steal customers from other carriers, not just get existing Verizon users to buy subsidized iPhones. AT&T’s weakness is its perceived network quality and unwillingness to allow iPhones to act as WiFi hotspots, called tethering. That’s why I think Verizon will make its iPhone LTE capable and allow it to do tethering with the goal of getting AT&T iPhone users to defect in droves.

There are at least 10 million AT&T iPhone users whose contracts are within months of ending, Every one of those users is up for grabs by Verizon.

Verizon can afford to do this because it is protected by that five gigabyte per month bandwidth cap. And since the LTE network went live in 38 cities just last week and will be rolling-out nationwide in coming months, Verizon will have plenty of network capacity to show off. Those first iPhone4G (4V?) customers should get blazing fast performance compared to the overcrowded and under-provisioned AT&T network.

Verizon already offers tethering on its Android phones, so it is logical they’ll continue that with any iPhone, especially since it is doubtful Verizon will throw an LTE Android phone on the network before the iPhone has had a chance to wreak havoc for a few months.  That gives Apple an advantage I’m sure it wants over Google/Android.

All iPhones to date have used GSM networks but Verizon is CDMA, not GSM, so a new radio will be required in any case. Why not, then, go LTE (or, more likely WCDMA/LTE)? By offering a true 4G iPhone, Verizon will get the marketing boost it needs to take back those same iPhone customers it lost to AT&T plus some. Apple, too, will regain an advantage over most competing smartphones. It’s win-win for both Apple and Verizon. And it is noteworthy that Verizon launched LTE without any phones for the network or WiFi hotspots — just a pair of USB adapters for laptops. That’s bound to change, of course, with my guess being the LTE strategy taking-on a decided iPhone caste.

Understand that AT&T, too, has its own LTE network coming. So if Verizon is going to take advantage of clear network superiority, they’ll have to move soon.

At least that’s how I would do it. What do you think will happen?

Redmond spent $100 million launching Windows 95, a number that set something of a record for its time and stood for long as the standard amount to spend if big companies were trying to make a point based mainly on the depth of their pockets. For Windows 7 (not Windows 7 Phone) I recall Microsoft set a new record, blowing-through $200 million. So when I read that they’d be spending $400 million on Windows Phone 7 — now this was something I had to see. I expected to find a Microsoft billboard on my garage door.

Not yet.

Given inflation (remember that?) $400 million doesn’t buy what it used to, but I still expected Windows Phone 7 to be as omnipresent as Windows 95 or Windows 7. And it’s out there, but the effort simply doesn’t feel like $400 million worth of marketing oomph.

But maybe this just isn’t the kind of oomph we’re used to, I thought. Maybe Microsoft is putting half or more of the money into subsidizing the handsets. If that were the case, though, wouldn’t the new Windows Phone 7 phones be cheaper than they are?

From what I have read these new phones are all around $200, which is the going rate for high-end smart phones these days on two-year contracts. So they are being subsidized, certainly by the carriers and perhaps by Microsoft, but the companies are just matching the competition: they aren’t trying to buy market share with lower prices.

I think that’s a mistake. I think lower handset prices right now are exactly what Windows Phone 7 needs to have a chance of building market share. Maybe that’s what Microsoft intended but the carriers are keeping the prices up by taking the Microsoft subsidies for themselves.  If that’s so then the carriers are betting on Windows Phone 7′s eventual failure.

Maybe Microsoft had to give the carriers those subsidies in order to get enthusiastic adoption of yet another smart phone platform. This could all be more or less out of Microsoft’s control, much like getting Matt Lauer to correctly pronounce Steve Ballmer’s name on the TODAY Show.

How can you mispronounce a name like “Ballmer?” Lauer can, but I can’t even phonetically replicate his effort here, it was so strange (and he did it twice).

Microsoft is in trouble right out of the gate because the rule of thumb is you need two or more clearly superior points of differentiation in order to gain share from an underdog position in a technology market. I don’t think Microsoft has two.

Microsoft is counting on the innate newness of Windows Phone 7, on its clever streamlined interface, on what Redmond believes — really believes (I know these guys and they love their product) — to be superior performance. That’s plenty of points of differentiation only some of them aren’t real.

Microsoft isn’t Apple. Even Microsoft knows that. So the value of “new” isn’t very much in this case. It didn’t work for the Kin, did it? It didn’t work for Bob, either. New never works if it doesn’t also mean “better,” and this doesn’t — at least not yet.

While Windows Phone 7 may or may not be technically superior, it isn’t so much superior that I can make a judgement that will stick. These phones aren’t out yet, nobody has really used them, and they haven’t been proven on a network (remember Antennagate at Apple?). So Windows Phone 7 may be dramatically superior but who would know? Is the sizzle alone enough to keep us from buying or renewing an iPhone or Android phone while waiting for the Windows Phone 7 handsets to ship? I doubt it.

Then there’s the App Store, or sparseness of it. iPhone and Android have between them about 250,000 more native applications available than does Windows Phone 7. Ironically Microsoft is the underdog here, fighting uphill againsst its own favorite strategy of market dominance. I don’t doubt their heart or determination to do so, but this is new territory for Redmond and I’m not sure they can make it.

So if I was Microsoft and had $400 million marketing dollars to throw at this new platform, I’d make every phone cost $99 or less. I’d bull my way into the market through sheer financial muscle, sending signals all the way down to my Mom in Arkansas that there’s a new sheriff in town.

Only Microsoft didn’t do that.

Maybe they couldn’t force such pricing on the carriers. More likely they are holding price cuts in reserve to be used only if needed — if the market doesn’t otherwise respond to what Microsoft sees as its clear advantages.

I can tell you right now that’s a mistake. If the goal is to get consumers to wait before buying a phone there will have to be some economic component of that motivation in the form of dramatically lower prices.

Having not started with lower prices from the very first minute, Microsoft may well have already lost the battle, no matter how good the phones actually are.

Over the past years Apple has brought out successively better and ever more solid versions of OS X. They’ve completed a transition from PowerPC to Intel processors that could have killed a lesser company. They’ve built a dominant line of professional apps and a competitive line of productivity apps, pricing them reasonably compared to Microsoft. They re-invented the media player and the smart phone. They revolutionized the record business. And having once vilified the very idea of Apple stores, they changed their minds and showed the world how stores ought to be run. The company is absolutely at the top of its game despite a CEO who was absent for months near death. How do you top that?

In 2010 you do so by entering new markets and turning on old friends, sometimes simultaneously. That’s likely to be the case with the coming iSlate tablet, or whatever it will be called, which definitely won’t be running exclusively on AT&T. You can see that from AT&T’s sudden embrace of Android, which never would have happened if Steve Jobs hadn’t first made a preemptive move of his own for the iSlate, probably to Verizon.  The Apple/AT&T marriage is now one of convenience only.

The iSlate (or whatever) will be Steve’s idea of a new category of computing, or at least that’s the way he’ll spin it. Not an ebook reader, not a tablet computer, not a pen computer, not a handheld, not a smart phone, the iSlate will be something else and I’d say that something will depend on: a) the content deals Apple can announce, and; b) whatever Steve decides to claim for the product, whether actually true or not.

So expect lots of print deals for newspapers, magazines, and books. Expect, too, audio and video deals for the iSlate. Expect some major UI gimmick too, because that’s always at the heart of one of these advances. “It isn’t an MP3 player! It’s an AAC player with this tuning wheel thingee!! ” See what I mean?

Apple will under-promise and over-deliver for the iSlate. And if for some reason they don’t, then they’ll just declare it to be a hobby, like the AppleTV.

Apple as a content company will move into subscription music based on its recent Lala Media acquisition, but don’t think this embracing of streaming means Apple will be abandoning downloads, no sirree. Remember that while Hulu, for example, has been making a lot of news delivering streamed TV and movies, Apple has been making a lot of profit downloading both for sale and rental.

The downloading-streaming-downloading pendulum is about to turn direction, I think, with the advent of true 1080p video on the net. Years ago no network was fast enough for high fidelity streaming audio, much less streaming video, so everything was downloaded. Then networks got faster and people streamed. Then video came along (and Bit Torrent) and people downloaded again. That’s when iTunes rose to power for those of us who actually pay our bills. Then YouTube made streaming again popular. But now 1080p files are just so darned big that downloading is, again, where it’s at.

So what does that say about Apple’s vaunted rejection of Blu-Ray disks? I’ve maintained in the past that Apple refused to offer Blu-Ray as part of its agenda to take control of downloadable HD video standards. and I think I was right. But here’s news: Apple’s new line of iMacs were supposed to ship with Blu-Ray drives, but didn’t. What gives with that? Maybe it was a technical glitch, maybe a last minute pricing problem, maybe Steve didn’t get enough blood or flesh from some corporate partner (Sony). But I think it means that the fight over HD was won by Apple to the extent that they feel they can start listening again to their professional customers from the video industry who have been screaming for Blu-Ray.

So look for Blu-Ray drives to start appearing, shortly, in Apple computers along with Blu-Ray support in all of Apple’s professional applications. Look also for Apple to offer some higher level of HD download, probably with expanded device portability courtesy of Disney’s new KeyChest technology, which I am sure came from Apple.

And then there’s the iPhone. The iSlate will be a bigger iPhone, but in 2010 we’ll surely see at least two next-gen iPhones, too — a smaller form factor in the Nano tradition and a 1 GHz processor on something like the current model. Apple will remain atop the smart phone market, where Android may eventually threaten, but not yet.  As we see from the first Nexus One reviews, Google has a lot to learn.

More about Google and the Nexus One tomorrow, as well as an interesting theory about Apple and Nokia.

Google’s Nexus One is a very nice smart phone as far as I can tell. I only read what you read and I haven’t yet played with one, but a couple nice folks who were on TWiT with me this week have tried it and liked it a lot, especially the screen. Yet many of the stories I’ve read today have presented this product introduction as a seminal break between Apple and Google with one trying to kill the other. Not even close.

Apple is very happy with its iPhone sales, thanks, and those are unlikely to be hurt much, if at all, by the Nexus One. Not that the Nexus One can’t be a huge success for Google. But here are the points everyone seems to be missing: 1) there is plenty of room in the mobile market for both Apple and Google, and; 2) this product introduction really marks the ultimate decline and fall of so-called “feature phones” and the rise to dominance of smart phones. Within two years there will be no more feature phones, at least not in the U.S.

The real losers today, then, are makers of feature phones and, maybe, Microsoft, which has the most vulnerable smart phone platform in Windows Phone.

The Nexus One introduction, coming on top of the iPhone, marks the true ascendence of smart phones as an alternative platform to desktops and notebooks. No, you can’t survive on a smart phone alone, the days of one computing device per person ended long ago.

But this does mark the beginning of the smart phone shakeout, when the industry matures and inevitably drops to no more than three viably competitive smart phone platforms. So just as you have Windows, Mac, and some form of ‘nix fighting it out for desktops and notebooks, so too we’ll shortly have three major mobile platforms to choose from.

iPhone and Android will be here for the long haul with the question being which of Symbian, Palm, Windows Mobile, or Blackberry will die?

What’s your guess? My guess is that Blackberry will be the third standard, Nokia will eventually leave Symbian for Android, and Microsoft will buy Palm but then screw it up, losing its position almost entirely in the mobile client space where smart phones will soon dominate, selling up to a billion units per year.

Hey this did turn out to be a predictions column after all!

More predictions tomorrow.