Over the past few days, the usual trickle of Google Phone rumors has turned into a torrential downpour. The Wall Street Journal published a report yesterday, confirming the New York Times’ earlier reports of a Google Phone prototype that’s being shopped around to wireless carriers. Meanwhile, Reuters reports that Google is hard at work on a number of mobile apps–including an advanced web browser–at a secret facility in Boston. On the other side of the pond, the BBC notes that Google is anxiously eying mobile advertising as the next big growth market. Who is Google working with? Depending on who you ask, either Verizon, AT&T, T-Mobile, Orange, or some combination thereof. And who is manufacturing the device? Either HTC or LG, take your pick.

This new wave of rumors doesn’t come as a complete surprise: as I noted two weeks ago, the company’s interest in the 700Mhz spectrum auction was more than likely to kick off a fresh round of wild speculation. That’s not all there is to it, though: Google really is sniffing around the wireless space and it’s clear that the company is gearing up for something big. The WSJ claims Google has invested hundreds of millions in mobile software R&D and I believe it–all mobile devices will be on the Internet in the not-too-distant future and Google would be foolish not to capitalize on this nascent market. Still, let’s not get ahead of ourselves. There are a lot of different ways that this could play out, so let’s take this one rumor at a time.

Google designs and launches its own handset: This is the rumor that’s been floating around for the longest–that Google is working on an advanced, Google-branded handset that will take on the iPhone. Everyone wants to believe this one. It would provide an alternative to the iPhone, would make Google’s excellent applications truly mobile and would herald the arrival of a powerful, consumer-focused device manufacturer in an industry that’s not exactly known for being customer-friendly. At this point, the Google Phone is so highly anticipated, it can almost give the iPhone a run for its money in the preemptive mythology department.

I want to believe just as much as you do but mark my words: Google is not going to manufacture, market and sell its own hardware. The reasons are simple: the mobile device industry has slim margins and Google doesn’t have the appropriate distribution/retail channels. Manufacturing and selling a phone would require a huge investment on the part of Google while offering very little in return. And lest ye forget, the company already tried and failed to market its own hardware before. Google is a smart company, folks, they’re not going to make the same mistake twice.

Google launches its own wireless network/MVNO: While slightly less unlikely than the phone rumor, I have to say, this one is pretty far out as well. In favor of the network rumor is the company’s interest in the 700Mhz spectrum and its experience in deploying a Muni WiFi network in its home town of Mountain View. As I’ve stated before, however, Google’s 700Mhz talk is likely just posturing to further its open network agenda. And comparing Muni WiFi to a nationwide wireless network is like comparing a sand castle to the Sears Tower–wireless networks require a huge investment in equipment and infrastructure, a massive sales and support staff and enough cash to cover network maintenance. Again, Google is smart enough not to play a game that it can’t win. Next.

Google creates a device in conjunction with a hardware manufacturer: This one is more than likely–in fact, it’s already a fait accompli. As it has previously done with partners like Apple and LG, Google will continue to build relationships with device vendors to ensure that new devices ship with Google software on board. This is a relatively low-risk venture for both parties and adds value to the product from the user’s perspective. Expect to see a lot more of this in the future.

Google partners with a carrier to deliver online Google apps: Though totally unsubstantiated, I would put my money on this one too. Google’s bread and butter is, has always been and will always be, web-based applications. Unlike with the PC, however, Google will have to forge relationships with carriers in order to deliver their apps to handsets in an optimal manner. Luckily, there’s a lot of money to be made in online advertising and that revenue stream will give Google a bit of leverage with the usually conservative carriers. Expect Google to announce partnerships with major carriers within the next year.

When a company as hot as Google starts making waves in a new industry, you can’t blame folks for getting a little excited. After all, Google is a forward-thinking company that releases great products and has a colorful logo. As much as we might like to believe that Google is preparing to take over the wireless industry, however, we have to face the facts: on the mobile phone, as on the PC, Google will continue to live as a provider of free, web-based applications and services. The folks in Mountain View know what they do best and as far as I can tell, they’re planning to stick with it for the conceivable future. And maybe that’s not such a bad thing. –Mehan