Google’s Android operating system may be a prominent fixture in the mobile world, but when looking at the app economy within it, Android is having a hard time competing with Apple and iOS.

One big reason: Android Market, Google’s online marketplace for Android applications.

For some developers, Android Market has proven to be an impediment to success. Unlike Apple, which has created a vibrant ecosystem for paid apps via the ubiquity of iTunes, Google has forced consumers to purchase Android Market’s paid apps using Google Checkout, which has relatively low adoption.

The friction around payments in Android Market is leading some developers to create their own payment solutions. If successful, those developers could reap the rewards from selling their Android apps without giving Google a cut.

Although Google theoretically stands to gain a lot from Android even without a huge piece of the paid app action, it would be foolish for Google to leave that money on the table.

Fortunately for developers, Google may finally be getting its act together. Yesterday, Google announced that it would be offering carrier billing for Android users on AT&T’s network in the United States.

AT&T, of course, is the second largest mobile carrier there, so allowing AT&T customers to purchase Android apps by having the cost added to their AT&T bill, circumventing Google Checkout, is potentially an important development for Google and the Android Market.

Google says it will “continue to partner with more carriers to offer carrier billing options for
their subscribers
” and if it can do that on a global basis, Android will be better positioned to compete with Apple and the iPhone in the app economy. It will also be better positioned to compete against Windows 7 Phone.

Although it remains to be seen whether Microsoft’s latest attempt to compete in the mobile arena will be a success or failure, Microsoft’s Marketplace sports a fairly seamless app purchasing process. Which, incidentally, already includes carrier billing.

Photo credit: laihiu via Flickr.