iPod Phone

It seemed like a sure thing: the iPod mobile phone. What could be more irresistible than a device combining the digital-music prowess of Apple Computer with the wireless expertise of Motorola ?

Motorola and Apple want to hold off until the phone is closer to hitting store shelves. But three industry sources say a lack of support from such giant cellular operators as Verizon Wireless and Cingular Wireless was instrumental in delaying the unveiling. So far, the wireless companies are reluctant to promote the Motorola-Apple phone.

Behind the clash are two very different views of the future of music on mobile phones. Motorola and Apple would let customers put any digital tune they already own on their phones for free. That would help Motorola sell more phones, and it would help Apple expand its dominance of digital music.

Verizon, Cingular, and other wireless operators want customers to pay to put music on phones. They think getting a full song should be like getting a ring tone, snippets for which customers now pay from 99¢ to $3. The carriers have no interest in conceding the booming digital-music market to the tech players.

At issue is whether Apple and Motorola leave room for carriers to benefit. Their phone could be loaded with songs simply by dropping it into a cradle attached to a PC, so that music wouldn't have to travel over carriers' airwaves. There's not a whole lot of profit to share, either. When customers buy songs from Apple's iTunes music store, they pay 99¢ a tune. But Apple only gets about 4¢ of that, after paying the record company and others, says researcher Strategy Analytics. Apple says iTunes is only a breakeven business.

That approach doesn't sit well with the megacarriers -- and they can hamper the sale of any cell phone. Verizon and others typically subsidize the phones they sell to customers, often charging $200 less for handsets at retail than what they pay Motorola and others

Apple and Motorola have options, too. One insider says that even if Cingular and Verizon, the two largest wireless players, won't sell the Motorola-Apple phone, smaller rivals, such as T-Mobile, may peddle it to gain ground on the industry leaders. Motorola says it's working out ways for carriers to profit from digital music, and it expects to launch the phone with that support this summer. Motorola and Apple could also bypass carriers altogether and sell the phone via retail stores or their own Web sites.

Trouble is, that would mean no carrier subsidy on the handsets. So customers would have to foot the music phone's entire bill, expected to be around $500. "Who wants the $500 iPod phone when you could buy a phone and an iPod for that much?


Seems to be an interesting battle ahead........