First of all: Google's idea about design seems to evade me :)
I didn't see most of your replies.

1. Legal issues
The software (application, service or custom OS) will be used on employee 
handsets. I assume our customer can get them to sign some papers for this, 
it is not really my problem :)
The client is not a seller, it is a large company and its activity involves 
mostly transporting goods throughout the country. The purpose of the 
software is to monitor truck driver location, thus enforcing some policies 
to save money. Can't have a truck driver get paid for telling lies about 
being stuck 2 hours in traffic, while watching TV at home, and getting paid 
for that, right?

2. The custom OS solution
I know this is the best option, but I'm not sure the customer will be 
interested in spending that much money.
Also, I think buying car tracking devices might exceed their budget and 
also cost them some monthly fee for them. They do own over a thousand 
trucks,  and buying GPS trackers for them would go up to 200k, while they 
plan to invest only half of that in software in general, and not only for 
the tracking app.
Besides, this would mean no profit for us :)

3. More questions regarding Android and having the app run in background
Android is based on Linux, so doesn't it have some low-level user 
management? You know, somewhat like a regular Linux distribution.
I am thinking maybe my app/service can run as root, and require root 
permissions to be shut down (maybe password protected?).
Also, I assume that services are the only type of sotware capable of 
starting on phone power-up, so probably this will be the best solution.
The next obvious question would be: can I prevent the user from changing 
the service start-up settings?
And of course: can the service open the 3G/GPRS connection at any time 
without generating additional dialogs?

Thank you!

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