Apple rethinks U.K. fee policy

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BRUSSELS -- Apple said Wednesday that it will scrap its policy of charging U.K. consumers more than other Europeans for songs from iTunes service within the next six months.

The move will standardize European iTunes prices, which can fluctuate by up to 15% according to exchange rates and national pricing policies.

It ends a three-year European Commission investigation into price-fixing allegations about iTunes that looked into Apple's contracts with major record labels Sony BMG Music Entertainment, Universal Music Group, Warner Music and EMI Group.

Commission officials said the price cut was a potential harbinger for its hopes to create an EU-wide market for music, film and game downloads.

Plans for an EU "content online" industry were unveiled by the commission Thursday, but its success hangs on whether the content industry, telecom giants and Internet service providers can overcome barriers over copyright and national licensing barriers.

Apple currently charges 79 pence (1.13 euros or $1.55) per song download in the U.K., compared with 99 euro cents (74 pence or $1.46) among the 15 EU countries that use the euro currency. There are other national variations -- for example, Denmark charges 8 kroner (1.07 euros or $1.58) -- but the U.K. has always maintained prices slightly above the rest of the EU, regardless of currency fluctuations.

The EC welcomed Apple's decision to drop its prices, and said it was ending its action against the company as a result. If it had found Apple guilty of breaching EU rules, the commission could have fined the company up to 10% of its annual worldwide profit. EU Competition Commissioner Neelie Kroes said the move will "allow consumers to benefit from a truly single market for music downloads."

EU consumers can only buy iTunes music in the country where their credit card is registered. Apple said that, with music copyrights currently granted on a country-by-country basis, it was unable to operate a truly pan-European iTunes store. "This is an important step towards a pan-European marketplace for music," Apple's chief executive Steve Jobs said. "We hope every major record label will take a pan-European view of pricing."

However, in addition to the copyright hurdle, Apple said the record companies, publishers and collecting societies had set the U.K. prices at a consistently high level. The computing giant has now pledged to take action against the labels.

"Apple will reconsider its continuing relationship in the U.K. with any record label that does not lower its wholesale prices in the U.K. to the pan-European level within six months," Apple said in a statement.

Jonathan Arber, an analyst at tech consultancy Ovum, said that blaming the record industry for its wholesale pricing policies was a risky move.

"This is likely to further damage Apple's already fractious relationship with the major labels, many of whom now seem to be moving rapidly towards DRM-free options, with freeing themselves from iTunes' dominance as a key motivation," he said.
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