Editor's Corner

3GSM has just started, and it already looks like one primary theme will be about how to combat Apple's iPhone. Throw a major contender in the mobile music space and suddenly the world's mobile operator community comes to its senses about how to spur customer demand for mobile music.

A U.K. startup called Omnifone announced today an all-you-can-eat, over-the-air full track music download service called MusicStation. It has 23 European and Asian mobile operators already committed to using the service, and all four major music labels have agreed to release their digital music catalogs to the service.  

Remarkably, the operators have agreed to brand the service MusicStation, regardless of who is offering the service and to promote it quite strongly, even taking out TV ads to counter Apple's marketing efforts. Pricing will range between 2 euros and 3 euros a week for unlimited song downloads to a wide range of 2.5G and 3G phones. It's unclear what the pricing will be in Asia.

Pricing has been one of the major roadblocks to customer adoption of mobile music services. A recent survey of some 3,000 people by Entertainment Media Research, a leading music research firm, found that while the iPod/MP3 player music market remains unsaturated, only 11 percent of those questioned actually pay to download music onto their mobile phone. According to the research firm, the figure represents a drop of 50 percent from 2005.

Around 25 percent were even interested in mobile downloads. Less than 5 percent said they were "very likely" to start mobile downloading while 44 percent said that they were very unlikely to do so in the future. Another 36 percent said they prefer to download music onto their PCs. So much for the advantage of immediacy the mobile industry thought it had to justify charging a significant premium for over-the-air downloads. It was becoming clear that consumers probably wouldn't care much if they had to download songs from their PC to their cool new iPhone.

So now the theory with MusicStation is that when consumers walk into a retail store looking for an iPhone, the salesperson can excitedly say, "We don't have one, but look at all of these other cool phones that can give you an experience like iPhone."

There's just one critical element missing in that scenario--the actual iPhone device. While there will be many iPhone look-alikes coming to market before the real one does, it's clear that the iPhone will reinforce what the iPod has already proven to handset vendors: That people want a stylish and functional mobile device with the iPod name associated with it. -Lynnette