At issue is a set of technologies aimed at protecting music and other content from being indiscriminately copied after being sold through mobile phone networks, a critical component of the new content services if record labels and movie studios are to sign on.
For more than a year, the mobile industry has been converging on a standard set of antipiracy technologies, which could help avoid the fragmentation that separates Microsoft and Apple Computer products in the PC world. But now patent holders including Sony and others have put a price tag on that technology, and some of the biggest phone companies say it's too expensive.
Patent holders have put a price tag on copy-protection standards for the mobile phone content business, and some of the biggest phone companies say it's too expensive.
The carriers have threatened to look elsewhere, a development that could help rival copy-protection developers such as Microsoft.
The carriers have threatened to look elsewhere--a development that could help rival copy-protection developers such as Microsoft--even if it slows down the release of their services and leads to incompatible products.
"It's disappointing that the (licensing group) has not taken onboard our previous concerns," Frank Boulben, executive vice president of British cell phone company Orange, said in a statement released by carriers Wednesday. "The current...proposals will lead to fragmentation owing to unacceptability, and critically delay launches of these new mobile services."
The rights-management component is an obscure but critical piece of a business that is attracting millions of dollars of investment in Asia and Europe, and is likely to launch in the United States later this year. Cell phone carriers that have spent billions on wireless high-speed data spectrum are eager to recoup their expenditure, and are turning to music and video downloads as their most promising early services.
Already a handful of mobile download services similar to Apple's iTunes Store have launched overseas. Vodafone has, with the help of France's Musiwave. Germany's T-Mobile is offering short versions of songs, while Japan's KDDI has predicted that music downloads will add $70 million to its annual bottom line in just a few years.
The start-ups that power these services have used a variety of technologies to protect their content. Some, like Seattle-based Melodeo, use their own digital rights management. Others are using technology based on the standards developed by the Open Mobile Alliance group over the past several years.
How much is too much?
The OMA technology is now turning out to be a hurdle, however. As with other standards, the underlying technology is actually owned by other companies, in this case Sony, ContentGuard Holdings, InterTrust Technologies, Matsushita Electric Industrial and Koninklijke Philips Electronics.
A central body called MPEG LA is handling the overall licenses for those companies, as it is for other similar patent groups. In January, that group suggested that companies that want a license should pay $1 per device using the antipiracy technology, as well as 1 percent of any transaction such as a song download that is protected by the tools.
Carriers and handset makers almost immediately said no. The GSM Association, which represents many of the biggest overseas carriers, issued a call for proposals from other rights-management companies.
In response, MPEG LA issued a new proposal last week, asking manufacturers to pay 65 cents per device, and carriers or other services to pay 25 cents for each user who downloads any content--whether a single file or 10,000 songs--in the course of a year.
"It is important for patent licenses to be a response to market needs, but that...includes balancing users' interest in convenience and reasonable access with patent holders' interest in a reasonable return on their intellectual property investment," said MPEG LA Vice President Larry Horn. "These (terms) are final."
The GSM Alliance said Wednesday that the terms remained "unreasonable and unworkable," and said it would continue to examine technologies. After its last call for proposals, 14 different companies submitted copy-protection tools for evaluation, the group said.
Despite MPEG LA's assurance, it's hard to tell whether the latest round of posturing is simply public negotiation or a true danger to what has been months of standards-setting.
Certainly a look at new copy-protection technologies might benefit Microsoft, whose tools are widely distributed in the PC world. Microsoft's Windows Media technology has been making headway in the mobile phone business in recent months.
It could even be a boost for Apple, which is helping design an iTunes-enabled phone for Motorola. Carriers have been skeptical of Apple, because that phone would encourage purchasing music though a PC rather than over the mobile airwaves.
Some insiders think the latest spat is more talk than real animosity, however.
"At some point they are going to have to resolve this thing," said one senior executive at a mobile phone music company, who asked not to be named. "It boils down to money, but this is one of those things that is fixable."
Nevertheless, the OMA copy-protection standards will need considerable additional work over the next months and years if they are to support the ambitious features that content companies require, some analysts say.
"The networks are finally pretty close to being workable" for multimedia, said Gartner analyst Michael King. "Now it comes down to the business cases and the protection of the content."