Music-enabled mobile phones and services could soon offer a significant threat to Apple's iPod and other MP3 players.

With Apple effectively dominating the online music sales market through iTunes and the portable media device sector with its iPod, the competition wants to change the rules of the game.

Competitors team to tear Apple down

Mobile music services and devices could offer Apple's foes a brand new corner to fight from. Microsoft wants its media player software to be broadly adopted in the space. Music labels want the price flexibility they hope to achieve in that market - and dream of higher music prices.

Meanwhile, shareholder-driven mobile handset and network providers are always seeking new growth areas to boost profits while locking customers into their system.

A new report from ABI Research indicates that new mobile handsets with much larger internal drives may help spur the evolving market to a fresh level of competition.

Samsung takes early lead

Mobile phones could become the "mass market mobile music device of choice", the report observes. Samsung recently introduced its SGH-i310 mobile phone, which is equipped with an 8GB hard drive.

Samsung can't lose - it's also working closely with Apple on iPods. It recently secured the contract to supply processors for flash-based iPods.

"As the cellular handset becomes the one device that the world carries, the standalone MP3 player may well be left behind," observed ABI Research analyst, Alan Varghese.

Capacity isn't enough

While hard-drive-based music players offer an edge in terms of capacity, Varghese believes there's a point beyond which no one cares if their device stores 2,000 or 7,500 songs. Capacity alone won't be sufficient for music player manufacturers (such as Apple) to defend market share, he explains.

Mobile operators are already creating iTunes-like stores of their own to serve their customers, and firms including 7 Digital already offer services to extend the ringtone and digital download markets.

The key advantage mobile phones may offer is that they are a class of device that users always carry with them.

The analyst points to the handiness of an all-in-one device: "What's important to many users is having one device that handles mobile music as well as the other functions - phone calls, digital photography, email, web browsing - now performed by mobile phones."