Motorola makes way for Microsoft's 2H 2006 iPod competitor

Barcelona (Spain) - Last Friday, Microsoft chairman Bill Gates hinted at his company’s readiness to shift gears in competing with Apple, with a statement from a speech at corporate headquarters that the company publicized in its entirety. Just today, at the 3GSM World Congress - one of the world’s leading wireless communications and connectivity conferences - Stage I of Microsoft’s new strategy may have been unveiled, with a deal with wireless phone leader Motorola that embeds Windows Media streaming and DRM in several future cell phones.

During the second half of 2006, Motorola announced at 3GSM, the manufacturer will release multiple handsets that incorporate the entire suite of Windows Media technologies. By specifically listing Windows Digital Rights Management, the Windows Media Audio codec, and Microsoft’s Media Transfer Protocol (MTP). Motorola did not need to say much more. The handset manufacturer has clearly set out to build Microsoft’s premiere and principal delivery vehicle for its next generation music service - what Gates’ message appeared to indicate would be a successor to today’s MSN Music.

Today’s announcement also marks an official shift in both gear and direction for Motorola, whose ROKR phone with built-in iTunes was met with disappointment from Motorola’s own management long before public ambivalence could even be gauged. Though Motorola has given no direct indication it would phase out the ROKR phone, or else give it a "codec transplant," it has turned down the volume for ROKR promotion in recent months.

"In addition to making Motorola handsets interoperable with PCs, Motorola and Microsoft plan to provide mobile handset offerings that are tailored for discovering and acquiring music over an operator’s 3G network," Motorola stated in its press release today. The company is working to give carriers an incentive to purchase their phones by offering them a way to carry a competitive service from a recognized brand.This is implied by Motorola’s promise to "provide operators with handsets optimized for efficient music downloads over a 3G network."

But whether Microsoft’s service, whatever it ends up being called, will be innovative enough to attract customers will depend on how long customers will be willing to put up with the little wire that connects their tune-playing handset to their PC. Even though today’s iPods can’t download iTunes songs over the air, much of the public criticism of Motorola’s ROKR is that it’s dependent on the USB 2.0 cable to connect it to the PC, from which all the songs are downloaded and transferred. Just two weeks ago, Verizon launched its VCAST service, whose key feature is the ability to download songs to the phone, using the phone, therefore appealing to a whole genre of customers who don’t even use PCs regularly.

According to Motorola, an over-the-air version of Microsoft’s service on Motorola’s handsets will be available "in 2007." What isn’t clear from today’s announcement is whether the upgrade to 2006 model handsets to handle 2007 over-the-air functionality, can take place entirely in firmware, or whether existing customers will instead find themselves holding suddenly obsolete technology in their hands.

On the other hand, a Microsoft alliance with Motorola and other major manufacturers - this one shows no signs of being exclusive - may enable the software producer to leverage connectivity as its key competitive feature against iPod, without actually having to build the phones itself. (We’ve seen what happens when Microsoft tries to ship high-demand hardware.) One could imagine how much more valuable an iPod could become, if it were also a cell phone. If Microsoft’s new service’s software is compelling enough, it could force Apple’s hand with regard to the mobility service that company is apparently developing, or at least effectively pretending to.

A generation of hastily produced wireless iPods could drive down the perceived value of existing non-connective models such as the iPod nano, for which there is probably very little room left to graft a wireless adapter. Microsoft has used its own competitors’ weight and overhead before in defeating it ; so if Microsoft does have a strategy for defeating the iPod - or at least knocking it down one or two or twelve notches - then this could be it.

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