Sources "familiar with the effort" have told The New York Times that Google's mobile phone project, now more or less taken for truth, will be built on open source Linux software, reports MediaBuyerPlanner.

In the same way Google Apps is positioned as a non-competitor to Microsoft Office, the Google Phone poses no threat to Apple's iPhone.
The company is unlikely to make the phone itself. Instead Google will build the software, hoping to persuade phone manufacturers to use it as an alternative to Microsoft's Windows Mobile and other operating systems currently built into phones.

Google is not expected to charge manufacturers for a software licensing fee. Instead, the cost of the phones may be subsidized in part by advertising.

"Google’s strategy is to lead the creation of an open-source competitor to Windows Mobile," according to one anonymous executive. "They will put it in the open-source world and take the economics out of the Windows Mobile business."

Phones based on Google technology are expected to be available next year. Google’s success will depend in large part on its ability to sign deals with the wireless carriers.

CEO Eric Schmidt called the cellphone market is the largest area of growth opportunity for Google.

After a summer of testing, last month Google released AdSense for the mobile platform.