Motorola Cancels iTunes Phone Launch; Rollout Possibly March 23 (UPDATE)

Motorola Inc. has postponed the planned launch of its first iTunes-capable phone following what sources report are problems between the company and wireless carriers who want a bigger stake and more say in the rollout of music-ready mobile phones. Itis possible negoitations with the carriers could be worked out in time for the rollout of the product at a industry event on March 23 in Miami.

Motorola spokeswoman Monica Rohleder told the Chicago Tribune that the company decided not to unveil the phone Thursday at the CeBIT electronics convention in Hannover, Germany after discussions late Wednesday night with "our operators", meaning carriers such as Cingular, Vodafone, Verizon and T-Mobile.

"Motorola discussed the logistics of this product with our carriers across the globe and we decided to wait to announce it when everybody is in sync with it," Ms. Rohleder said.

Motorola was expected to officially announce its E790 mobile phone Thursday, with the capability to store and play music downloaded from the iTunes Music store (iTMS). The phone was reported to have eight hours of music storage capability.

If issues are resolved between Motorola, Apple and the carriers, there is speculation a different iTunes-ready phone -- the Motorola ROKR -- could debut at the Miami Music Multimedia (M3) conference, set to begin March 23 in Miami.

"Over the course of the year, youill see more (iTunes) devices," Alberto Moriondo, Motorolais global director of entertainment for mobile devices, told the Reuters news agency.

The real issue: More money for the carriers

Although Ms. Rohleder would not elaborate on the issues at hand, industry watchers say its all about money and control for the wireless carriers, who want to make sure they get their take of revenue from the phone and the service.

At the heart of the problem is the way the technology works. Although the iTunes-ready phone can store and play songs, it does not download music over the carriers network. Instead, a user would capture music files via a Bluetooth connection to a personal computer that has Appleis iTunes software on it and a connection to the Internet.

By not downloading music through a mobile phone call to a Internet connection such as America Online, the carrier is pushed out of the equation and is denied the chance to make more money from its subscriber.

"That is where the whole problem lies," Jon Gales, president and chief correspondent for the mobile phone news site told The Mac Observer. "Carriers have spent a ton of money building up their data networks and they want people to buy music, just like they buy ring tones, weather forecasts and news now. They donit want people to put music on their phones unless they can make some money out of it. Itis just that simple."

Mr. Gales said a prime example of a carrier wanting to force its customers to spend more money is the recent crippling of the Bluetooth capabilities on Verizon Wireless phones.

"Verizon Wireless has taken a lot of heat lately for making it so that you can only use Bluetooth on its phones with a wireless headset," he said. "You canit use it to transfer data, say from a Mac. Theyire doing that to force you to download stuff over their data network so they can make more money."

Mr. Gales said its difficult to determine exactly what the carriers want if they know they canit make any more money on music downloads.

"Itis difficult to figure out what it is they really want," he commented. "They make money when they get new customers and sell you a phone, but obviously they want more...I canit see a way around this, based on how the technology works."

Mr. Gales commented that Apple Chief Executive Officer Steve Jobs has been adamant that consumers have a right to buy their music from wherever they want to and play it on whatever device they would like without having to pay more.

"(Mr.) Jobs says itis all about choice, but the carriers are saying they want to offer choice and make some money too. Itis going to be interesting how they work this out," Mr. Gales said.