Motorola announced the new phone with a striking advertising campaign knocking the iPhone as the "iDon't." The ads issue zingers such as, "iDon't have a real keyboard," "iDon't allow open development," and "iDon't run simultaneous apps."

Droid may have these things -- iPhone's lack of a physical keyboard has been an irritant since its initial release -- but it's not clear that these features will really matter to customers. For instance, David Worthington wrote on Technologizer.com, "Those points resonate with me, because I'm a member of the tech punditocracy . . . Apple's draconian policies don't really affect my overall experience. I haven't met too many disaffected iPhone users, probably because the user experience -- while imperfect -- is pretty great."

Is Verizon Network Enough?

One thing that potentially would make a difference is the network. AT&T has come under withering criticism from iPhone users for its weak 3G network. "Verizon's network has much better coverage than AT&T when it comes to next-generation voice and data , so this does give them an edge over AT&T," said Tim Bajarin, principal analyst with Creative Strategies. "And there is a lot of pent-up demand for a top-notch smartphone that is similar to if not equal to Apple's iPhone."

But if the Droid is the best iPhone competitor yet, it still falls short of Apple's "gold standard," Bajarin said. That means the primary market for Droid will be existing Verizon customers. "I believe that Droid is a good option for Verizon customers, but it is still not in the same class of an iPhone," Bajarin explained.

"The iPhone has become the gold standard in smartphones and with its 85,000 apps and growing customer interest. Verizon and Motorola will get solid interest, but Apple will still have the edge in this smartphone war," he added.

European Rollout

While Verizon customers may well gravitate to a good smartphone that offers an iPhone-like experience and a universe of third-party applications, the reality, Bajarin said, is that "Verizon customers really want the iPhone. Since the likelihood of that happening is minimal, this is at least a solid alternative."

In other Droid news, Motorola announced the phone would be available in Italy and Germany as the Milestone, with service to be provided by O2. The two phones are quite similar, with a 3.7-inch touch screen, five-megapixel camera and slide-out QWERTY keyboard, but the European phone will use High-Speed Packet Access instead of EV-DO, as in the U.S., and will have 8GB of storage instead of 16GB.

In the U.S., the Droid will be priced at $299.99 with a new two-year commitment, but a $100 mail-in rebate will bring the price down to $199.99. Pre-release reviews have been promising. One review site called the phone "the most powerful and fastest Google Android device to date," featuring a "gorgeous display and the benefits of Android 2.0," but complained that the keyboard "feels flat" and that music and video capabilities lag behind the iPhone.