The Apple (AAPL) iPhone Gets More Competition

Barron’s has pointed out that Wall St. is becoming increasingly concerned about the high expectations for the Apple (AAPL) iPhone. One analyst from JP Morgan point to issues of iPod cannibalization if iPhones are not available in great supply and the very high price of the cell service plans that AT&T (T) is adding to the price of the phone.

That should be enough trouble, but several of the world’s largest handset companies have set up a flat fee music service to challenge the spread of the iPhone to Europe and Asia. There is little reason to believe that the operation could not be moved to the US as well.

According to the FT, the new service will be called MusicStation and will be pre-installed on handsets. The group supporting the service includes the four largest handset companies in the world: Nokia (NOK), Motorola (MOT), Samsung, and Sony Ericsson. To add to the fire power of the start-up, content will come from the world’s largest music publishers: Warner Music Group (WMG), EMI, BMG, and Univeral Music Group. The FT writes that "it is estimated that 100 million MusicStation-enabled handsets will be sold over the next 12 months, dwarfing the 10 million iPhone handsets Apple aims to ship in the next year."

With Apple’s shares up 110% this year, and sitting near an all-time high, a misstep with the iPhone could take the stock down a very long way.

Up until now, the iPhone had competition in theory. But, the reality of the industry’s determination to keep Apple out of the market has suddenly come in like a lion.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.