What is Google (NSDQ: GOOG) thinking? I’m not being facetious, I really want to know… The company has a lot of mobile services available, and there are quite a few indications that it’s working on its own handset. Add to that its expressed interest in bidding for spectrum in the upcoming FCC auction, and the sum of the components pretty much comes to MVNO. Maybe two years ago that seemed like a good idea, but the untimely demise of three major content-focussed MVNOs in the past year has to be giving Google second thoughts. However, there is another business model coming to the fore, pioneered by Apple (NSDQ: AAPL).

Virtual MVNO: Quite a few commentators have referred to the iPhone as an MVNO, for example this commentary from Analysis analyst Avi Greengart at RCRNews: “Like an MVNO, Apple doesn’t have to deal with any of the hassles of buying spectrum, building out networks, or maintaining them. Unlike an MVNO, Apple doesn’t even have to worry about managing billing for voice and data, or managing customer service. Apple also gets to piggyback on top of the carrier’s retail distribution network and advertising instead of competing with them. Apple’s model includes all the benefits of being an MVNO without any of the risk, and all the benefits of being a high-margin hardware vendor without many of the usual carrier constraints.” Apple has created the virtual MVNO.

It’s a compelling idea; The problem that finally did in Amp’d was operational, failing to collect money it was owed. According to this O-meon feature on the last days of Disney (NYSE: DIS) Mobile the main issue for that company was selling the handsets...it preprogrammed the address book which meant that the handsets couldn’t be sold in blister packs which ruled out big-box retailers, and Sprint (NYSE: S) wasn’t keen to share retail space with the competitor—at least until it was too late. Contrast that with AT&T (NYSE: T) putting a lot of effort into selling the iPhone.

No money in service: There is also this telling quote in the same article: “Besides,” as a former [Disney] mobile services creative manager said, “the real money’s not in selling phones and basic services. It’s in the add-ons and up marketing ringtones, wallpaper, and the like.” Apple recognizes this and didn’t even try to get control of basic telephony services—true, it managed to wrangle a cut of the service fees which would be difficult for anyone else, but it didn’t need to. Apple could have a reasonable business selling the hardware and content via iTunes.

Google isn’t a hardware player like Apple is, but is similar in having a strong brand and knowing its core business. “Finding a way to make money off free content and services is Google’s endgame--and something it already does very well..."We bring unrivaled scale in that business,” said [Dilip Venkatachari, a director of product management]. ”We do one thing and do it right: We serve the most relevant ads for the consumer in a particular situation.” This was in an interview with InformationWeek, quoted in ITNews.

Personally, I’m unclear as to what benefits Google can offer on its own handset that it can’t offer via the services it has on other handset via deals with manufacturers and carriers, but I’m willing to accept the possibility that there are some. Whatever plans it has for the spectrum it has indicated an interest in buying, an MVNO (or more accurately, a mobile network operator since it would own the spectrum and build out the network) would be a risky proposition. However a “Google Phone” handset would be well-received, and Google could get revenue in the same way it does on the web. Carriers would probably line up to offer the handset in their stores, since people who buy it are pretty much by definition going to use mobile data. I think this is the route Google will take: It lets them control the user experience and generate revenue while reducing the outlay for distribution and service support. Perhaps more importantly, the carriers might be interested now that Apple has broken the ice. Ex-Amp’d CEO Peter Adderton has said that the main idea for Amp’d was as a mobile media company, and an MVNO was the only way they could see to get good distribution. That isn’t the case now…