There is an unwritten rule that companies who compete with their customers are inviting trouble. When companies break this rule, generally their competition will use this information against them when there is a bid on the table. Over time, when you break this rule, it bites you in the rear.

Companies like Intel, who have a dominant position in the market, are generally able to bend or break these principles to some degree but for most others, you know where to draw the line.

Google recently broke this rule and broke it big. With the Nexus One they have launched a device which is better than all other Google phones on the market. Say what? After the hundreds of millions of dollars in development and marketing costs from other manufacturers, the company supplying the software to a variety of companies and devices comes out with a better phone with a newer OS and more functionality?

This is the exact sort of behavior which helped Microsoft of old develop a reputation for being underhanded and a ferocious competitor caring more about the bottom line than partners. But even Microsoft hasn’t done anything like this in recent memory.

So does this move make Google more evil than Microsoft? I can’t imagine Google is naïve and they are definitely not stupid – so what is their true motivation here?

Jason Lackey has some really good points as he analyzes the situation but one thing he doesn’t discuss is how much of a failure the open OS model has been in the wireless communications space to date. After all, RIM and Apple are cleaning up and their operating systems are tightly coupled to their devices. Perhaps Google execs are cognizant of this fact and don’t want to take chances at ceding anymore share to Apple?

Or perhaps their early efforts in the market are so pitiful compared to RIM and Apple that they had to do more. Maybe they just retried to draw a straight line on a Droid and couldn’t  . The reasons are currently unclear but this all makes for a fascinating soap opera between Google and device manufacturers. Android has moved from open systems savior of the market to evil, dreaded competitor.

And Google is leveraging its significant position as guardian of page and video views online to show all sorts of ads for the Nexus One meaning, the company’s cost of marketing is far less than the competition.

What happens next here is anyone’s guess but it will certainly make for great entertainment.