O2 UK on Friday launched Litmus, a community uniting developers frustrated by industry’s laborious approval processes, with early-adopter customers keen to help test new products. It’s not exactly an app store, but it will speed up developer relations, could form the basis for Telefonica’s global application retail ambitions, and may yet help open up Apple’s iPhone development process, too, Litmus head James Parton said…

—What is it?: “It’s a fresh take on the developer community. We’re going to be bringing real O2 customers in to the environment - we’re stepping out of the way and allowing developers to interact with our customers. The historical model in terms of how we do development in O2 is, folk like myself look out in to industry and cherrypick the things we think our customers would like. We want to empower our customers to tell us what they really like and use it as an early radar system. When we get strong endorsements, we’ll then take those apps to the rest of our customers.”

—How’s it work?: Developers can release software for download as soon as they sign up. “Developers can either publish the app straight for testing, or, if you’re confident enough in your app, you can publish it for sale.” Aren’t participating consumers at risk from untested downloads? “There’s a degree of risk because we’re asking our customers to get involved with apps that aren’t commercial, so we’re trying to find the right kind of customers to get involved.” Location lookups have been zero-rated for Litmus apps, so no-ones pays for that traffic whilst testing.

—Charging for apps: “The developer can make money from day one,” Parton said. Authors can choose from 26 pricepoints, from free to £5. The model is a revenue-share, weighted 70/30 in developers’ favor; O2’s slice helps fund the Litmus project, Parton said. Why ask beta testers to pay? “It’s wearing two hats - it’s a testing ground, but it’s also a commercial environment. Especially in the current economic climate, the number one frustration we heard back from developers was, there are hundreds of developer communities but none show a developer how to make any serious money - we felt it was important to address that.”

—An iPhone developer community?: Developers can release software for any platform, with Symbian, Java and Windows Mobile catered for so far. O2 is Apple’s iPhone carrier in the UK but, given Apple’s stringent iPhone development rules, are iPhone apps off-limits? “At the moment, the position with Apple (NSDQ: AAPL) is quite clear - Apple want developers to go to them and their developer community. We are in conversations with Apple about that. ” So Litmus may play a part in opening up iPhone development? “We’re having conversations with Apple to see if we can get to that point.”

—Seeding an app initiative: As T-Mobile USA, Google (NSDQ: GOOG), RIM (NSDQ: RIMM) and others either build or plan for their own download stores in Apple’s wake, O2 is lagging; availability of downloadable apps from its mobile portal is very limited, Parton said. But the apps Litmus users get most excited about could form the basis of a future app store from the company: “We’re already having the internal discussions within Telefonica (NYSE: TEF). Lets assume that things go well and the model gets validation; we’d definitely be looking to roll out to other Telefonica markets toward the back end of 2009.” Any eventual initiative would be the usual combination of aggregated apps found on other decks like Vodafone (NYSE: VOD) live! plus some unique apps developed at Litmus.

—Speeding up the innovation “I’ve been just as frustrated as the developers and suppliers as to how long it takes to bring products and services to market. I’ve got the battle scars of launching lots of products and services on O2 - sometimes, we’re not easy to work with. We realized 12 months ago that the way that we are organized internally is around delivering the big infrastructure products like SMS or MMS. But the world has changed, quickly and dramatically. With the advance of Web 2.0 and beyond, you’re seeing massive fragmentation of the kind of things people are interested in.” Facebook has rapidly added thousands of applications, for example, Parton said. “But we tend to do the big ticket items, one or two of them a year, not thousands of apps per day. The challenge for us is how to address that long tail of opportunity.” So far, Litmus has taken 14 months from conception to go live in the UK. “Compared to most things telcos do, it’s been quick,” Parton said.