Motorola's iTunes Phone on the Rocks

The tech match made in heaven has prompted a hell of a standoff.

Bowing to pressure from its wireless telco customers, Motorola (MOT Quote - Cramer on MOT - Stock Picks) yanked its new Apple (AAPL Quote - Cramer on AAPL - Stock Picks) iTunes phone from its scheduled unveiling at the CeBIT technology show in Hanover, Germany, on Thursday.

And to the disappointment of gadget lovers here in the U.S., Motorola's much-anticipated entry will be missing from the lineup of new music and media-playing phones from Nokia (NOK Quote - Cramer on NOK - Stock Picks), Samsung and SonyEricsson debuting this week at the wireless industry CTIA show in New Orleans.

Building on the design success of its thin metal-clad Razr phone, Motorola tapped Apple for iTunes, the music system inside the iPod digital music player. The scorchingly hot idea came together in a new music phone called Rokr.

The stunning Rokr no-show at two of Motorola's prime product showcases offers a behind-the-scenes glimpse at the power struggle between phonemakers and the phone companies that want to play a big role in the music download business.

A Motorola representative says there is "absolutely nothing wrong with the phones," and that the decision "had nothing to do with anyone other than Motorola." But analysts say the telcos canceled the iTunes phone debut party because they are in no mood to celebrate another feature that doesn't drive up network revenue.

"This is a manifestation of conflict we'll see more and more as the phone takes on additional functionality," says Yankee Group analyst John Jackson.

For the phone companies pouring billions of dollars into network upgrades for faster wireless access, every advance in digital media seems to represent another revenue opportunity they can't control, says Charter Equity Research analyst Ed Snyder.

Snyder predicted that music phones would be an even bigger success than the wildly popular camera phones that preceded them. But just as we saw with the camera phone, the wireless telcos are confronting difficulties in cashing in on the trend.

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