NEW YORK, Sept 23 (Reuters) - T-Mobile USA will sell the first phone powered by Google Inc's (GOOG) Android operating system for $179, slightly cheaper than its rival, Apple Inc's (AAPL) popular iPhone, the wireless service said on Tuesday.

That price competes with the entry-level price of $199 for the iPhone, with a two-year contract. T-Mobile's new G1 phone is seen as Google's answer to the iPhone and is the Web search leader's biggest push yet in the cell phone market.

The G1 phone, made by Taiwan's HTC Corp (2498.TW), will debut on Oct. 22.

In addition to the iPhone, the Android operating system will compete with Microsoft Corp's (MSFT) Windows Mobile operating system, and Symbian software, in which Nokia (NOK1V.HE) owns a stake. The phone is also expected to compete with Research In Motion Ltd's (RIM.TO) BlackBerry.

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"The G1 doesn't threaten Apple now but Android has raised the bar for competing mobile platforms. The bigger concern here is for Microsoft and Nokia if Google can win over the hearts and minds of operators and developers," Geoff Blaber analyst with British firm CCS Insight.

The G1 phone has a touch-sensitive screen, a computer-like keyboard, Wi-Fi connections and includes most Google applications and services, like Google Maps with StreetView, Gmail and YouTube. It comes in three colors: black, white and brown.

The G1 will launch in Britain in November and across several countries in Europe in the first quarter of 2009.

Amazon.com said its digital music store will be loaded on the G1 allowing users to search, download, buy and play more than six million songs, pitting the device directly against the iPhone.

The new phone will feature Android Market, where customers can find and download applications to expand and personalize their phone.

Google, which first revealed its plans for Android in November last year, aims to differentiate itself by letting multiple independent vendors offer applications to Android users.

"Because the platform is open we think Android is somewhat future proof," said Andy Rubin, Google director of mobile platforms, speaking at the launch event.

A similar strategy helped increase the buzz around Apple's second-generation iPhone, which can support more than 3,000 applications that can be downloaded from Apple's iTunes store.

Google is well ahead of rivals Yahoo Inc (YHOO) and Microsoft in Web search on computers and is looking to use Android to retain its dominance in search related ad sales as cell phone Web use gains prominence. But so far no clear winner has emerged for the mobile Web.

Microsoft has been gaining ground solidly with its operating system for advanced cell phones, some of which are also made by HTC.

Nokia offers mobile Web services through Symbian, the leading mobile operating system for smart phones with around 60 percent of the market. Nokia accounts for 40 percent of the global mobile device market. (Reporting by Sinead Carew and Yinka Adegoke, additional reporting by Tarmo Virki in Helsinki; Editing by Derek Caney)

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