Forget the speculation about new hardware. From a software perspective, Google already has the building blocks in place for a winning phone.
The Google phone we already own
Think about your ideal phone, what does it do? First, it makes great sounding calls, and integrates easily with your contact lists. Second, it handles messaging and e-mail nicely. Third, throw in some multimedia functions, like video and music on the go. Fourth, some internet functions would be nice, nothing too fancy, but just enough to alleviate the boredom of a long commute. Some news and an RSS reader, for instance. For good measure, let's navigate with the phone. All of these functions should be easy to use, and should play well together.
Messaging
Except for the first requirement, the phone calls themselves, Google already has every bit of software in place, and many of them already run on your phone (read our round-up of Google's phone services here). Google Mail is available as a standalone app for many smartphones, and it works very well, much better than your standard non-smartphone's e-mail client, though it's not as responsive as a push e-mail client or Microsoft's mobile version of Outlook. Still, it wouldn't be a stretch to integrate SMS messaging, and even MMS for multimedia, into the existing paradigm.
Multimedia
Google already owns YouTube and GoogleVideo, inarguably the largest video sites on the Web. To bring these platforms to a mobile phone would probably require some software gymnastics beyond our comprehension, but the most important aspect, the content, is already in place. Would we mind watching Lonelygirl15 instead of previews for "Are We There Yet Part II?" No, we'd actually prefer it. And instead of photoblogging from your phone, we imagine Google allowing YouTube content providers to upload videos taken with their phone's camcorders. Imagine the new level of copyright infringement, as bootleg concert videos and rampant car wrecks make their way to the popular download site, courtesy of the millions of low-quality cameras already in the hands of YouTube fanatics.
For the internet, Google already works with many Web browsers, paring down sites and chopping them into pieces manageable for a phone's small screen and even smaller memory capacity. Google's excellent RSS reader is already available to mobile Web users, and though the interface isn't enticing, it certainly gets the job done. While Apple's iPhone brags a more powerful Web browser, the iPhone's lack of 3G networking may only highlight just how poor a Web navigation tool a phone can be. Google went the opposite route, making the Web fit onto cell phones, instead of trying to get a cell phone that fits the Web.
Navigation
Finally, Google Maps is a good tool for basic directions, and with some tweaking could be an excellent navigation tool. Though Helio already pairs Google Maps with GPS for navigation, the system is unresponsive enough that it includes a warning not to use the program while driving. A little tweaking to better integrate the app with a GPS module, paired with Google's already enviable satellite and road map hybrids, and the combination would be unbeatable, especially by the navigation tools currently offered by the major carriers.
Why isn't it here yet?
So the only question that remains is hardware, and certainly Google wouldn't have to build this themselves. There are plenty of competent manufacturers to build a compelling device, certainly LG and Samsung have shown some design savvy in recent months, and even Sony Ericsson and Nokia could come up with a compelling device for the search giant. These manufacturers have fallen short in their interface design, not in their hardware. The Apple iPhone isn't a revolutionary piece of hardware, but it does have a revolutionary interface.
In this respect, Google is already well-placed to deliver a functional, enjoyable phone. Their only stumbling block would be the powerful American carriers. Want a Verizon Wireless phone? You'll probably be stuck with Verizon Wireless' interface and archaic menu structure (Internet = "Get It Now / News and Info / Search"). Hoping to cell on AT&T's network? You'll have to obey their rules. Unless you're Apple. Or Google. Samsung, LG, and the rest of the manufacturers just don't have the leverage that Google would have; they simply don't generate the buzz. Cingular bent over backwards to give Apple control of the hardware and interface, because they know the Apple phone will sell itself. The Google phone will have the same level of brand recognition and pre-release enthusiasm.
Now they just need to build it.
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