Why Motorola didn't announce iTunes phone

updated 10:24 a.m. ET March 28, 2005

NEW YORK - It's been the great "Whodunit?" of two big technology shows: Who put the gag in Motorola Corp.'s mouth just as it was going to unveil a new cell phone featuring the iTunes music download service from Apple Computer Inc.?

Motorola initially said it acted alone, then quickly pointed to Apple, citing the computer company's long practice of never unveiling new products until they're actually available to buy.

Many industry players, however, suspect that a wireless service provider intervened, essentially telling Motorola that, `I'll be darned if I'll sell your phones to my customers if it means they can buy songs through Apple and Motorola without giving me a piece of the pie.'

Or, some surmise, perhaps a wireless carrier who planned to offer the iTunes phone balked at the last minute?

This mystery, which played prominently this month at both the CeBit show in Germany where the phone was to be unveiled and then the CTIA Wireless show in New Orleans, drives right to the heart of an uneasy dynamic simmering in the cellular industry.

The rush is on to deliver music and video to mobile phones, with wireless providers and device makers jockeying for position to grab their share of the payday, all parties mindful of the surprising billions being spent on musical ringtones.

At the same time, the media companies who produce the entertainment, which also includes video games, are approaching cautiously, determined to avert any Napster-like, file-sharing bonanza among cell phone users.

In fact, Motorola also plays a role in a second drama involving these choppy uncharted waters.

Earlier this year, a class-action lawsuit was filed in three states involving a Motorola phone sold by Verizon Wireless.  The v710 handset was equipped with a short-range wireless technology called Bluetooth and was configured to work with cordless headsets.  Only one problem: Its file-transfer capabilities had been disabled.

The suit insinuates that Verizon Wireless is obliging subscribers to use its cell network if they wish, for example, to send a photo taken on a camera phone to a computer or another cell phone.  Verizon charges extra for such transmissions, while a direct Bluetooth transfer would cost nothing.

Verizon says the Bluetooth function was not disabled to prevent picture transfers but rather to satisfy the demands of media companies who don't want their content shared with non-paying customers.

"I know why we all loved Napster.  It was free.  When it comes to the cell phone I have to abide by the rules of the content houses," said Jim Straight, vice president for wireless data and Internet services at Verizon Wireless.  He said the mobile media market is so new that it will take time before all the technologies and content relationships fall into place in a secure, smooth-running manner.

"Customers get frustrated because they don't see what they want day one.  That's understandable. Unfortunately, we have bad guys out there who want to do other things" such as illegal file-sharing.

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