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Exclusive Apple has canned a software project that was guaranteed to prove controversial, just weeks ahead of its slated announcement at MacWorld Expo next month.

The project would have seen Apple move into the ringtone retail business in direct confrontation with cellular carriers, with whom Apple already has a stormy relationship.

Apple has added audio books, podcasts and videos to the iTunes Music Store since it launched in 2003, and is expected to unveil satellite radio integration in the future.

Stateside sources were unable to confirm details of the final product, rumors of which caused alarm amongst cellular carriers. We can't confirm the carriers were directly responsible for bringing pressure to bear on Apple, but what's in no doubt is that ringtone revenues form a significant part of their revenues.

(Text messaging forms the bulk of carriers' data income, but ringtones are a multi-billion dollar industry the success of the hugely irritating 'Crazy Frog' jingle has been credited with reviving Verisign Inc's fortunes).

The relationship between Apple and the carriers has been far from smooth. Apple's iTunes phone the Motorola ROKR was delayed, reports suggested, because of antipathy from the networks. It launched without support for over the air (OTA) downloads. The networks see OTA downloads as a revenue opportunity, with Sprint launching a music download service at $2.50 per song last month.

The carriers also believe phones are good contenders for playing portable digital music, the lukewarm reception to the ROKR (nicknamed CROKR) not withstanding.

The networks also want to use their ubiquitous retail presence on the high street to sell music over a personal area network, but admit the wireless technology hasn't reached critical penetration on today's handsets. ®

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