Week in review: Reading Apple's crystal ball

According to various sources, Apple is considering an all-you-can-eat plan in which users would receive free access to iTunes in exchange for paying a premium for its iPod and iPhone devices. If accurate, this would mark a big about-face for CEO Steve Jobs, who previously has dismissed the rental music model.

As part of the deal, Apple would have to agree to share sales revenue from the devices with the labels, a source close to the deal said. Cutting the labels in on iPod or iPhone revenue would mark a sharp turn in Apple's strategy.

The deal being discussed by the labels and Apple calls for the company to license the music and also "kick in a piece of the device sales," the source said.

The Apple device, which hasn't been determined yet, would come preprogrammed with a certain amount of music that, after a period of time--perhaps six months or a year--would roll into a subscription type of service plan, the source said.

Apple would be in for a fierce legal fight, should it ever undertake such a strategy, warns David Pakman, CEO of rival digital-music service eMusic.

"It smells like classic Sherman Antitrust Act to me," Pakman said. "I only know what I've read, but the plan sounds very similar to the tying practices Microsoft used with Windows (and) Explorer. And Microsoft is still paying the penalties for that one."

"What is really strange, as an Apple enthusiast, I find it counter to Apple in general."
-- CNET News.com reader

An Apple representative said the company does not comment on "rumor and speculation." The talks were first reported by the Financial Times.

The debate among CNET News.com readers on this topic was varied, with many baffled by the possible deal.

"This type of device is counter-culture to why people enjoy any music player, let alone an iPod," wrote one reader to News.com's TalkBack forum. "What is really strange, as an Apple enthusiast, I find it counter to Apple in general."

Sometimes it's more advantageous to be able to read lips rather than a crystal ball, as those following recent comments by Adobe Systems CEO Shantanu Narayen have learned. During a conference call to announce Adobe's first-quarter earnings, Narayen said Adobe "will work with Apple" to make sure that Flash applications can run on the iPhone.

"We can now start to develop the Flash player ourselves, and we think it benefits our joint customers," Narayen said. "So we want to work with Apple to bring that capability to the device."

However, apparently people read too much into that statement, and Adobe has admitted that it can't bring Flash to the iPhone just because it thinks that would be a neat idea.

Narayen's comments weren't exactly definitive, but they were judged by several media outlets to be a confirmation of Adobe and Apple's plans to put a Flash Player on the iPhone.

But Narayen also seems to have misunderstood the terms of the SDK. Flash isn't a mere third-party application, like a game or an instant-messaging client. It's a plug-in that would have to work very closely with Safari on the iPhone, and that's something Apple has declared off-limits to third-party developers at this time.

One of the U.S. government's most significant sales of wireless airwaves concluded, racking up nearly $19.6 billion in bids over 261 rounds.

The 700MHz spectrum, which is currently being used to air analog TV broadcasts, was put on the auction block by the Federal Communications Commission in January. It's scheduled to be freed up by February 2009 to make way for all-digital broadcasts.

The big winner in the auction was Verizon Wireless, which won licenses for nationwide coverage in the C-Block in the 700MHz spectrum auction. This means that Verizon, not Google, will control the spectrum that is required by the FCC to adhere to special open-access rules.

Google had lobbied the FCC last summer to include several rules in the 700MHz spectrum auction that mandated open access. The FCC adopted only one of Google's proposed rules, which requires the winner to allow any device or application to connect to a network that uses this spectrum.

However, there's a good chance that Google didn't even want to win, as my colleague Maggie Reardon suspected last year. It didn't make any sense for Google to get into the telecommunications business.

Why would Google bid if it didn't intend to win? By bluffing its way through the bid, Google was able to drive the price high enough to get the FCC to adopt open-access rules it pushed for that require the network operator to allow any device or application to connect to it.

Meanwhile, consumer watchdog groups and some lawmakers want to know why the block of spectrum reserved for public safety in the auction didn't hit its reserve price. A coalition of nine consumer advocacy groups sent a letter to the chairman of the FCC asking the agency to investigate whether the public-safety requirements for the D-Block license were too stringent. The groups also want the FCC to study whether plans for the shared public-private network are even still viable.

Despite the obvious financial success of the auction, it will be a long time before it's clear whether the FCC was successful in achieving some of its broader policy goals, such as creating a more open wireless marketplace and a nationwide interoperable public-safety wireless network.

Rocky in Redmond
Amazon.com may have accidentally stolen some of Microsoft's thunder--or it may have just helped clear up some confusion. Microsoft was unclear earlier in the week regarding when it would release its Vista Service Pack 1 to consumers. But the e-tailer put the matter to rest when it listed the release date as Wednesday on its Web site.

CNET News.com's Ina Fried has been trying to nail down the exact shipping date from Microsoft. She did find out that Windows Vista SP1 is expected to be available in retail stores "as soon as April," according to a company representative.

The main features expected in SP1 are fixes to avoid incompatibilities with some applications, as well as better reliability, security, and performance.

A new ranking of global brands shows Microsoft's reputation sinking in recent years. Among the possible factors: Apple's "I'm a Mac" ads. Microsoft lands at No. 59 in the rankings for 2007, down from No. 11 in 2004, according to the survey from CoreBrand.

"The effect of Apple's 'Hi, I'm a Mac' advertising campaign may have taken its toll on Microsoft," CoreBrand CEO James Gregory said in a statement. "The launch of a series of new products, following a long, relatively dormant period, will be closely watched to see if it will have a positive impact on the Microsoft brand."

On the search front, the latest monthly market share numbers from ComScore show Microsoft still struggling just to tread water against Google. While just a continuation of an existing trend, the market share figures highlight why Microsoft is so serious about buying Yahoo.

It's not clear that Yahoo is the answer to all that ails Microsoft's online business, but it is the biggest option out there, when it comes to boosting Microsoft's presence.

Yahoo is painting its financial projections as rosy to bolster its case with shareholders in a "last-ditch attempt" to get Microsoft to up the ante in its bid for the company, analysts say.

Yahoo executives began a series of meetings with the company's largest institutional investors and showed them a presentation detailing the company's three-year financial projections that illustrates "the broader picture of all the assets," a source familiar with the matter says.

Also of note
The FBI has recently adopted a novel investigative technique: posting hyperlinks that purport to be illegal videos of minors having sex and then raiding the homes of anyone willing to click on them...The U.S. Supreme Court denied a Microsoft appeal to an antitrust case that dates back to Novell's desktop PC software business in the mid-1990s...Residents of apartment and condominium buildings will have to be allowed a choice among telephone providers serving their area, thanks to new rules adopted Wednesday by federal regulators.