Nokia Antes Up New Wireless Player, Raising The Stakes For iPod Rivals.

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Author: Bruno, Antony

DIGITAL ENTERTAINMENT; MOBILE

Nokia, the world's leading mobile phone manufacturer, has introduced what is by far the most advanced combination of wireless phone and MP3 player, upping the ante for devices hoping to compete against Apple Computer's iPod.

Digital audio devices from Creative Labs, iriver, Dell and even consumerâ€"electronics powerhouses Samsung and Sony have not been able to match the excitement surrounding each revamp of the iPod, and consumers have greeted them with a collective shrug. But the Nokia device, due this fall, and a pending Motorola iTunes phone have shown that music-optimized wireless devices can generate significant buzz alongside the iPod.

Perhaps the most striking feature of the Nokia N91 is its 4GB internal hard drive, which can hold 3,000 songs. Samsung previously introduced a 2GB internal hard drive phone, available only in Korea. Nokia's N91 not only has double the capacity, it will be available worldwide.

Unlike other phones, which have small jacks for wireless headsets, the N91 boasts a 3.5-millimeter headphone jack, making it compatible with a wide array of high-end audio headsets. Its integrated Wi-Fi connection allows users to wirelessly drag and drop music files from a PC. This augments its Bluetooth and USB 2.0 connections, which are standard on other music phones.

The N91 also boasts an audio output port for hooking up external speakers or stereo systems. It has a sleek, futuristic look, with music control buttons on a faceplate that slides down to reveal the phone keypad. And, of course, it is compatible with third-generation broadband networks, as Nokia is targeting carriers that will soon launch wireless downloading services.

Bob Shallow, director of rich media and music at Nokia, says, "We're trying to get as far ahead as possible and get aligned with the carriers' key objectives."

Motorola is taking a different approach. The company delayed the introduction of its long-anticipated iTunes-compatible phone in part because U.S. wireless carriers objected to Apple controlling the experience. The N91 is compatible with every file format except iTunes.

"Certainly the iTunes brand is a powerful brand," Shallow says, "but it takes away from the brand of the carrier."

Regardless of whether its iTunes incompatibility proves problematic, the N91's cost may limit its mainstream appeal. The U.S. retail price will depend on how carriers make it available to subscribers, but the European price reportedly reaches about 700 euros ($900). Even with carrier subsidies, the phone likely will cost much more than $500 stateside.

Questions also surround Nokia's claim that the N91 will allow users to send stored music to others via e-mail, Bluetooth file transfer or multimedia messaging. The prospect of peer-to-peer file-sharing over the phone has generated a degree of interest, but it is not yet clear which devices or music services will be interoperable with the files.

While it may be easy to share a file between two phones of the same type that use the same carrier, it will be much more difficult between different phones on separate networks. Diverse file formats, lack of carrier interoperability and digital-rights-management concerns are all expected to limit the ability to share music wirelessly.

"Forget it," industry consultant Richard Siber says. "It's just too problematic."

Despite these challenges, wireless-handset manufacturers have the best shot at matching Apple's success in the portable-music-player market. Companies like Nokia and Motorola wield the recognizable brands, marketing prowess and deep pockets needed to make up for Apple's early lead.

Niche MP3-makers like Creative Labs and iriver realize it will take time for the market to mature and for their brand recognition to increase enough to make a significant dent.

Both companies reported increased sales for the past quarter. But hitting those numbers required deep price cuts and heavy marketing expenditures, resulting in large operating losses. While this is a typical strategy to gain market share, some observers question whether Creative Labs and iriver can remain in business long enough to see that increase.

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By Antony Bruno