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Microsoft also announced the Windows Phone Preview for Developers, a program intended to address one of the platforms' major weaknesses compared to iOS and Android: quality apps.
Officially called General Distribution Release 3 (GDR3), the update will roll out via carriers to existing phones over the next several months. But GDR3 could still portend an imminent product release, said Gartner analyst Carolina Milanesi, who noted in an email that Microsoft's announcement is in line with a Nokia phablet rumored to launch next week in Abu Dhabi.
Nokia was originally expected to introduce the phablet in September, but the announcement was reportedly pushed back after Microsoft purchased the company's device business. The device is expected to boast a 6-inch screen, much larger than the 4.7-inch display in Nokia's Lumia 625, currently the screen-size champ among Windows handsets.
[ Does Microsoft's beleaguered Surface still have a chance? Read Microsoft Surface Vs. Dell Venue: Tablet Rivals. ]
Phablets such as Samsung's Galaxy Note series have become popular, especially in emerging markets, and research firm IDC said in August that phablets could cannibalize sales of smaller tablets. New contenders continue to enter the market, most recently the HTC One Max, a 5.9-inch Android phablet announced this week that, like the iPhone 5s, includes a fingerprint reader.
Supply chain reports suggest Apple will release a larger-screen iPhone in 2014, but with GDR3 Microsoft could beat its rivals in Cupertino. The update adds support for 6-inch 1080p screens as well as Qualcomm's Snapdragon 800 quad-core processor, a chip that should ensure future Windows phablets have the processing muscle to smoothly move around all those pixels.
For current Windows Phone users, the update will add a Driving mode, designed to prevent motorists from becoming distracted by their phones while on the road. The feature works with a Bluetooth device to limit notifications, including calls and texts, until the driver is safely parked. It can also send automatic replies while the vehicle is still in motion.
GDR3 will also introduced tools to help visually impaired people more easily use Windows phones, simpler tethering between Windows handsets and Windows 8.1 devices, and more ways to assign custom ring tones, including the ability to designate specific tones for instant messages, emails, voicemails or reminders.
The update also adds a Rotation Lock option, which keeps the screen's display fixed even as the device is rotated, as well as new storage management options, including the option to view files and apps according to how much space they're using.
The Windows Phone Preview for Developers program gives app builders early access to updates so they can confirm ahead of launch that their apps will work. It adds to a variety of programs Microsoft has implemented over the last year to encourage developers to write for its smartphone platform, which has over 175,000 apps but still trails its competitors in both quality and quantity.
On Monday, Microsoft VP and Windows Phone Manager Joe Belfiore told USA Today that Microsoft's smartphone customers will have access to "virtually any app" in "not too many months." But Bloomberg report earlier this month suggested that Microsoft's Nokia purchase hadn't yet galvanized mobile developers, who haven't dismissed Windows Phone or Windows 8's Modern UI but are still more focused on iOS and Android.
Microsoft has also struggled to secure manufacturing partners. Nokia makes the vast majority of current Windows phones, and Microsoft has reportedly approached HTC about ramping up Windows Phone production in exchange for reduced or eliminated licensing fees.
Despite these struggles, Windows Phone 8 has solidified itself as a third option after Android and iOS. IDC said in September that the platform will end this year with 3.9% of the market, but that it could account for more than 10% by 2017. Research firm Kantar Worldpanel said around the same time that Windows Phone 8's market share in Western Europe is already more than 9%, thanks to attractively priced Lumia handsets.