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They've tried this before - the Microsoft Kin (Photo credit: abulhussain)

The rumors of Microsoft building their own Windows Phone refuse to die. Fueled by statements from Steve Ballmer to the BBC (“Is it fair to say we’re going to do more hardware? Obviously we are…”), the Wall Street Journal’s anonymous sources (“Microsoft… is working with component suppliers in Asia to test its own smartphone design”), and numerous hints from various technology sites that ‘they know something is up’, the idea of a Surface Phone continues to gain acceptance and momentum.

I’ve already touched on why this is a good idea for Microsoft. In short it drives the Windows Phone platform forward in a direction that is completely the direction Microsoft wants to go; it keeps the hardware partners on their toes; and it gives Redmond their own ‘hero’ handset without having to pick a favourite supplier. Let’s assume that the simplest answer to all these rumors is the actual answer â€" that Microsoft is building their own smartphone to follow on from their own Surface tablet. Let’s also make the small step that these smartphones are intended to go on sale to the public, rather than as in-house testing units around the Redmond campus.

What would this do to the Windows Phone market?

Well it’s going to be a bit embarrassing for Nokia. Unlike HTC or Samsung, the Finnish company has went all in and committed to using Microsoft’s mobile OS in their high-end devices. The same worries and fears that Acer, HP, and Dell have over the Surface will now land in Nokia’s lap. They would have known  that they would not get the Windows Phone playground to themselves, but to have Microsoft swing in and push their own handset as opposed to the whole platform will lead to some long conversations in the board room over strategy and alternatives.

Publicly, Nokia will talk about the strength of the eco-system, but behind closed doors there will be a more hostile reaction… and a very careful reading of all the contracts and patent agreements.

HTC is going to feel squeezed. They’ve been here before with Android and the launch of the Google Nexus devices, which slowly pushed them out of the limelight that covered the Nexus and Galaxy devices. Let’s not forget that Microsoft is currently pushing the HTC Windows Phone 8X as the signature device of Windows Phone. A Surface Phone would be the natural heir to that banner, and you can be sure Microsoft will switch their affection to one of their own.

2012 has not been a great year for HTC. While they retain a broad portfolio of devices and carrier relationships, they’ve made a significant investment of time and marketing on their two Windows Phone handsets. To have Microsoft block their planned route back will make their continued relevancy at the high-end of the smartphone market even more challenging.

Samsung are probably best placed of the three lead partners to shrug their shoulders and say ‘meh’. While the ATIV S is ‘the stylish one’ out of the initial Windows Phone 8 handsets, the South Korean company is not relying on Microsoft’s mobile platform for their continued success. They’re simply paying the small binds to stay in the game, just in case it gets hot.

It’s probably to Samsung’s advantage that Microsoft launches a Windows Phone because of the destabilising effect it will have on HTC, their nearest competitor in the Android marketplace.

To be honest I don’t think that there would be any short-term impact on consumers. It’s likely that Microsoft would limit distribution of their own Windows Phone to online orders and the US-based Microsoft stores, so people would have to go out of their way to find the handset.

Would it benefit the whole Windows Phone ecosystem? That’s the interesting question. It would certainly upset the balance between the manufacturers and Redmond. How long would it take for that balance to be regained is probably the subject of furious planning and war-gaming behind the closed doors of everyone involved.

As for the geeks, they’ll only want one question answered. When will it happen?

If Microsoft follow the pattern established by the Surface, they’ll want to announce the device just before the smartphone goes into production to reduce leaks from the supply side. That would mean a reveal four or five months before it goes on sale.  Assuming availability in late Q2 or into Q3 2013, how does a February announcement at Mobile World Congress sound?