What Does Nokia do When Cheap Android Phones Arrive?

Nokia (s nok) today introduced the new C3 Touch and Type handset, a relatively inexpensive S40 handset offering a touchscreen display and connectivity features often relegated to smartphones. Alcatel last week announced an even cheaper touchscreen handset with similar features, but the device runs the Google Android (s goog) 2.1 operating system. With Symbian^3 and MeeGo, Nokia is clearly shunning the idea of going with Android for its future phones, but what happens when competing Android devices challenge Nokia’s dominance of the feature phone market?

It’s easy to say that comparing a top-notch hardware maker like Nokia to a budget brand like Alcatel (s ALU) isn’t comparing apples to apples. From the standpoint of overall quality and expertise of design, Nokia wins hands down, and the new C3 has a premium quality to it. However, I wonder if it will matter when inexpensive, “good enough” hardware running the Android operating system comes to market, just as Alcatel’s OT-980 will next month for €99 ($129 U.S.) on a pay as you go contract. By comparison, the impressive C3 will cost €145 in the fourth quarter of 2010. Both feature 3G and Wi-Fi connectivity, memory card slots and touch displays.

The point here isn’t to say that the OT-980 will outsell the new C3; it certainly won’t, as Nokia’s global presence is sure to get the C3 in the hands of people all around the world. But the OT-980 is just one infantry soldier in the Android army onslaught that’s mustering for battle.

The number of Android devices sold by 2014 is expected to rival that of Nokia’s Symbian platform according to Gartner (s IT), and while the pundits and analysts can often be wrong, the consumer won’t care. The general public will see a cheaper outlay for comparable hardware, smartphone-like connectivity, and an app store. I’m still here at Nokia World feeling more positive about the overall strategy that Nokia has put forth, but the consumer side of me is concerned. Am I just being paranoid, or should Nokia worry about their longtime dominance in the lower end of the market?

Related research on GigaOM Pro (sub req’d):

Mobile OSes Are No Longer Just About Mobile