By working with the mobile gadget value chain rather than against it, Google will probably rewrite the rules in the $1 trillion wireless industry.

That’s what electronics market research firm iSuppli — the company known for guesstimating Apple’s hardware costs — wrote in a short report e-mailed to reporters on Tuesday afternoon.

iSuppli thinks Google has a strong chance of success in changing the basic business model for wireless carriers away from selling voice call subscription plans to selling ads tightly targeted to mobile device users.

The building blocks for Google’s new way of doing business, iSuppli says, are these:

  • Android, the open-source operating system any phone maker can adopt without paying a licensing fee demanded by makers of most other phone software.
  • A 70/30 split on revenue from app sales for Android. Developers get 70 percent of the cash from sales, compared to the American wireless industry’s standard 50/50 split. For many developers, the extra 20 percent is the difference between losing money and minting it.
  • Free Google Maps and turn-by-turn GPS-based navigation in Android. “The beauty of Google’s navigation initiative is that its offering, while free, will result in profits via mobile search and advertising,” iSuppli analyst Jagdish Rebello said.

In conclusion Rebello wrote that “Google is well positioned to reshape the wireless business in its own image.” That means free phone service, paid for by ads, just like Google’s search engine.

[Image: OverOll.com]