Operators to take on Apple’s iPhone

The mobile phone and music industries are hoping to kick-start mass-market consumption of music over mobile handsets by unveiling on Monday a new, low-priced flat-rate service intended to challenge Apple’s plans to offer music on its iPhone device.

Twenty-three mobile phone operators with a collective subscriber base of 690m, including Norway’s Telenor and Vodafone’s South African partner network Vodacom, are backing the plan.

The MusicStation service will give mobile phone users unlimited access to the music libraries of labels such as Universal for a flat rate fee of £1.99 ($3.88) per week.

A premium service costing £2.99 a week will allow downloads to a PC as well as the mobile.

Users will be able to listen to the songs and store them on the phone, but not burn them on to CD or distribute them over the internet.

Unlike most existing mobile music download services, MusicStation does not require an expensive 3G handset, but will work on a majority of existing handsets, including low-cost models.

In contrast, Apple’s iPhone, due to launch later this year will come with a pricetag of around $499.

“By leveraging the hundreds of millions of handsets sold every year by operators, we believe we can give Apple a run for its money in digital music provision,” said Rob Lewis, one of the founders of Omnifone, the UK company that will run the music service.

Apple’s iPhone comes as a potential threat not only to mobile manufacturers such as Sony Ericsson and Nokia, who have launched music-playing handsets, but also to mobile operators who have been hoping to boost revenues with their own music download services.

Mobile operators paid billions of pounds at the beginning of the decade for licences to build high-speed third-generation mobile phone networks but have so far seen few customers using them.

The industry estimates on average mobile music users download just six songs a year. At a price of around £1 a song, this means just £6 of revenue a year, compared with potentially £104 a year from MusicStation subscribers.

Fees will be shared between operators, music labels and Omnifone.

Six mobile networks are planning to launch the service in western Europe and the Asia-Pacific region before June giving the music service a head-start on the iPhone, which is not expected to be launched in Europe until this autumn.

“It is clearly a measure aimed at the iPhone, and I think it probably can challenge it,” said Matt Hatton, analyst at Yankee Group.

“It has got the backing of so many operators, while the iPhone will have issues to do with its high price and the fact that it will not generate a great deal of revenue for operators.”

Omnifone is a privately-owned company founded by Mr Lewis and two other internet entrepreneurs, Phil Sant and Mark Knight.