Droid First Step in iPhone Fade Away?

Is the Droid going to kill off the iPhone?

Amid the Android frenzy — at least among mobile industry insiders and early adopters — some sources say yes.

With Verizon’s two Android-powered handsets on sale today, the industry is abuzz with predictions of how the mobile open source platform will play out over the long haul, especially against the record-breaking iPhone.

The Motorola Droid goes on sale today on the nation’s largest wireless network, along with the smaller, less expensive Droid Eris by HTC, following the kick-off of the Motorola Cliq on T-Mobile and HTC Hero on Sprint.

Though Apple (NASDAQ: AAPL) ranks third worldwide in smartphone sales volume, after market leader Nokia and No. 2 Research In Motion, there’s no denying the wild popularity of the iPhone, given that it was launched only two years ago and there are only a handful of models available, compared to the proliferate versions of BlackBerry and Nokia devices.

As Android comes of age after a bumpy start, one industry insider is saying the new OS has the potential to unseat Apple’s iPhone as the preeminent smartphone.

“Greater scalability is the major differentiator between the Droid and the iPhone and could spur a Mac vs. PC-like debate in the tech world,” Tim McLaughlin, CEO of mobile app and Web development firm Siteworx, told InternetNews.com.”History shows that unlike Apple, PCs gathered the ecosystem of profitable companies, such as Dell and IBM, thanks to its open technology. Apple, however, only develops systems that benefit itself.”

McLaughlin sees the iPhone eventually becoming a commodity that could struggle to compete with the Droid devices on price.

“Droid doesn’t have the sleek polish of the iPhone, but it’s an example of how Android will get there. In the end, they’ll wind up being so much cheaper than the iPhone people just won’t pay the premium,” he said.

Currently, the prices are competitive. The Droid costs $199, the as the iPhone 3GS, and the Eris is priced at $99.99, close to the iPhone 3G.

For now, the Droid is garnering mostly positive reviews, but some new owners say the interface is a bit confusing, the design a bit clunky — with “all the charm of a toaster.”

Still, that’s not stopping industry observers from placing big bets on the potential of Android.

“It all comes down to economics, and the only company interested in making the iPhone ubiquitous is Apple. On the other hand, you have Google, Verizon, Motorola, all these big companies together, the cumulative market value is huge,” McLaughlin said. “You put all of those resources together, and even though it’s less effective because it’s not centralized like Apple, it will still have a huge impact.”

Richard Webb, an analyst at the tech research firm Infonetics, also sees Android toppling the Apple cart.

“The iPhone OS is sure to face stiff competition from the open source Android platform,” Webb said in a statement. “Apple will have to fight hard to drive its market share back above 10 percent.”

Meanwhile, research firm IDC sees Android as a viable threat in the OEM sector. “With an expanding portfolio of handsets and a just-released update of the code, Android is poised to mount a serious challenge to the incumbent smartphone OEMs for the first time in its brief history,” IDC’s William Stofega said in a statement.

Apple did not immediately respond to a request for comment.