The original Motorola (NYSE: MOT) Droid smartphone just got an upgrade. The much-vaunted version 2.2 of the Android operating system -- aka "Froyo" -- is now available for Droid users. The benefits of upgrading are many:

  • An early version of Flash 10.1 by Adobe Systems (Nasdaq: ADBE), hinting at a fuller online experience than ever before
  • Enterprise-friendly security features like remote locking and stronger password policies
  • Revamped controls for the video camera
  • Better integration with Microsoft (Nasdaq: MSFT) Exchange email accounts

... and more! Faster program execution! 270-degree screen rotation! Creamy goodness all around!

But wait. There's something big and important missing -- perhaps the single most momentous improvement from Froyo's announcement. Contrary to initial promises, you can't turn your phone into a Wi-Fi hotspot with this Froyo update.

Wait, what?
I sincerely doubt that the decision to remove this feature was Motorola's, though Verizon (NYSE: VZ) is trying to spin it that way. According to PhoneScoop, a Verizon spokesperson explains the lack of connection-sharing features thusly:

"The Droid by Motorola doesn't have [the] hardware to support a Mobile Hotspot. With tethering there is no Connection on the PC side that will allow you to tether the device so the answer is that option isn't part of this update."

I call shenanigans.

Droid users have been able to do both tethering (wherein you connect your phone to a computer via USB cable, then enjoy the 3G data connection on your computer) and Wi-Fi hotspots (same as above, except without the pesky wires) for a long time. Tethering is a simple and painless operation even on my lowly myTouch 3G; the hotspot version takes some serious geekery mojo, and may void the warranty on your phone. But it can be done on many Android models without changing or adding any hardware, and the popular Droid comes with tons of "I did it!" success stories.

What's the real story?
When Google (Nasdaq: GOOG) makes tethering and hotspotting standard features of the operating system, it should just work. If there were any eccentricities in the Droid hardware that would require some fancy footwork, Google and Motorola would have fixed them. After all, this is no niche product, but the single biggest seller in the entire Android stable so far.

Instead, I'll bet this is a decision handed down by Verizon, which offers the same functionality through Verizon applications preinstalled on select smartphones. That'll be $20 a month, thank you very much.

I can see why Verizon wants to keep that revenue stream going, rather than surrendering to a free standard feature of the phones it sells. $20 a month adds up to $480 over the lifetime of a two-year contract. If AT&T (NYSE: T) had any Android Froyo phones available today -- which it doesn't -- I'd expect the system to be similarly neutered. The big boys, as always, are circling the wagons to protect their profits. That gives smaller players Sprint Nextel (NYSE: S) and T-Mobile a window of opportunity to stick with the fully functional platform, promote the heck out of this fact, and trade some profitable cream off the top in return for higher sales and subscriber additions.

Come clean, Verizon!
Tell us that you disabled it, Verizon. Just come clean. I'm not surprised to see Verizon cutting out these features, but I do object to being lied to. It's a well-known fact that the original Droid can and does handle both Wi-Fi hotspot creation and USB-tethered data connections.

Is the lack of tethering and hotspot-sharing a deal breaker for you, or just another useless feature? Either way, vent your spleen in the comments below.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. Microsoft and Sprint Nextel are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Adobe Systems is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.