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Why Didn’t Apple Launch a Music Streaming Service?

Data-hungry apps are colliding with limited data plans.

Many expected Apple to announce a streaming music service today that would allow users to stream songs from iTunes to multiple devices, much as they do with Internet radio services such as Pandora. Apple did launch “iTunes in the Cloud” at its annual developers’ conference, but the emphasis was not on streaming music. Instead, as part of Apple’s iCloud offering, iTunes will let users buy music once and have it automatically downloaded to multiple devices, as well as backed up on Apple’s servers. Apple CEO Steve Jobs made no mention of a Web interface through which users could access this music.

Apple certainly has the technology to launch a streaming music service. In December 2009, it bought the music startup Lala, which sold “Web songs” that users had the right to stream through their browser but not download. In March, Amazon began offering a Cloud Drive that let users access music from multiple devices or stream it through a Web interface. Google followed suit, announcing a music service to allow users to access songs through the Web.

It is possible that the record labels from which Apple has to license the music it sells were unwilling to allow music streaming. But another important factor that could have deterred Apple is mobile carriers’ movement away from unlimited data plans. A streaming version of iTunes could have hugely increased the amount of data that carriers would be expected to carry. The largest carriers in the U.S., AT&T and Verizon, both cancelled their unlimited plan in June 2010. T-Mobile and Sprint both still offer unlimited plans. Today, T-Mobile says, the average 4G smart-phone user consumes about a gigabyte of data per month. That number could change significantly if a popular service like iTunes truly moved to the cloud.

“When the iPhone launched, it had no Netflix client, no Rdio, no Pandora, no streaming baseball—and AT&T was still almost brought to its knees,” says Stephen O’Grady, an industry analyst at RedMonk. “Carriers witnessed what happened to AT&T. The days of unlimited numbers appear to be numbered no matter what.”

Though capped data plans come in different flavors, AT&T now offers a fairly standard set of choices: monthly plans of 200 megabytes, two gigabytes, and four gigabytes. The carrier notes that four gigabytes of data translates to streaming standard-quality YouTube video for just over six and a half hours. According to a data calculator offered by AT&T, streaming an hour of music a day comes to just under a gigabyte of usage each month. These numbers, however, refer to services used in isolation. A user who sends e-mail and surfs the Web in addition to watching the occasional YouTube video will use up the data more quickly. (Because Wi-Fi usage doesn’t count toward the cap, a user could set up a mobile device to run on Wi-Fi in home or office, only depleting the data allowance when on the road.)

The disappearance of unlimited data plans means many consumers will need to monitor their data habits. But plenty of factors make monitoring data use extremely confusing. Not only do different kinds of content burn data at different rates, but carriers also give different figures. T-Mobile’s data calculator, for example, says that streaming an hour of music a day will use up about 1.5 gigabytes of data per month–quite different from AT&T’s figures.

Streaming media–very popular with Netflix customers–burns data the fastest, says Dan Hays, a partner and consultant at PRTM, a global management consulting firm. “The densest, largest content [such as music and video] will provide the greatest strain on mobile networks for the same reason that they’re attractive to the cloud.”

“The collision is here,” Hays says. “In many ways, there’s a fundamental disconnect between communications-hungry applications and limited mobile broadband resources.” Part of the problem, he says, is that carriers and consumers are the ones who have to worry about the costs of streaming data–application manufacturers don’t suffer financially if they produce software that is more data-hungry. As apps move to the cloud, he says, “there needs to be some sharing of the cost of that access.”

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