“[Apple Computer, Inc. is] developing an iPod phone with Motorola Inc. that the pair have started marketing to wireless operators. Motorola says it expects at least one carrier will begin selling the phone this summer. If that happens, the carrier would not build its own music store and instead send its customers to iTunes,” Roger O. Crockett reports for BusinessWeek.

“But Apple has had a rough start in working with wireless operators. Most major wireless companies, including Verizon Wireless and Sprint, have balked at carrying the iPod phone. That’s a serious impediment because the operators essentially control distribution by subsidizing phones. Why the resistance? Operators want customers to download songs over the air, directly to handsets. But with the iPod phone, customers would download songs to a PC and then copy them to the phone. ‘It’s hard for people in any industry to support something that cuts them out of potential future revenue streams,’ says Graeme Ferguson, director for global content development at Vodafone Group, one of the world’s largest wireless players. Apple declined to comment for this story,” Crockett reports.

“The two sides also have very different perspectives on how digital music stores should work. Verizon, Sprint, and Cingular are expected to charge about $2 for wireless downloads when they introduce their services, or twice the 99 cents per song on iTunes,” Crockett reports. “They figure they can charge a premium for the convenience of getting songs anytime, even though customers most likely won’t be able to listen to those songs anywhere but on their phones, at least initially. One knowledgeable source close to Apple says the operators are simply being unrealistic if they expect customers to pay $2 or $3 for a song, especially with restrictions. ‘If you can get something for a buck, why would you buy it for $3?’ says the source. ‘Do they think people are that dumb?'”

Full article here.

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