The co-opetition between Apple and AT&T could lead to a potentially strained relationship, according to C|Net on Thursday. So far, all’s worked out well, however, AT&T is not accustomed to the fast moving nature of Apple.

"With this deal, AT&T thought like a traditional phone company, focusing mostly on driving subscriber growth," said Michael Goodman, director of digital entertainment for market research firm Yankee Group. "But the partnership with Apple won’t make AT&T a successful provider of digital entertainment."

Therein lies the problem. While AT&T has delved into music, working with eMusic, Apple has sold 3 billion songs. In fact, Mr. Goodman estimated that all the carriers, AT&T, Sprint, Nextel and Verizon sold as much music in 2006 as Apple sells in three or four weeks.

There are several co-opetition factors that create some tension between Apple and AT&T. AT&T gets no revenue from iTunes music sold to iPhones. Apple, not AT&T, gets to decide services and offerings on the iPhone. The recently announced Wi-Fi Music Store bypasses the AT&T network -- even though with good reason related to network speeds. Finally, Apple will generating revenue from its recently generated ringtone service, not AT&T. In 2006, the U.S. carriers generated US$873M in ringtone revenue.

AT&T’s Mark Collins, VP of consumer data services for AT&T’s wireless unit appears to have a good perspective. "AT&T is a market leader in wireless and Apple is the market leader in online and portable music. So it was a natural fit for AT&T and Apple to make a product available to our customers," he said.

However, new issues from the fast-paced Apple continue to crop up. For example, it’s not clear yet whether the iPod touch is a competitor to the iPhone from AT&T’s perspective. Apple’s Natalie Kerris doesn’t believe it. "...one is a phone and one is not. So I would disagree with an interpretation that these products compete," she said.

Even so, by offering a Wi-fi enabled iPod that can buy music wirelessly, AT&T may not see it that way. "The best that AT&T could hope for from this deal with Apple is adding new subscribers," Mr. Goodman said. "And my gut feeling is the iPod Touch will have a negative impact on iPhone sales at least in the U.S."

Ultimately, it boils down to how good a partner Apple is in the best business sense. It’s an area where Apple has had some problems recently. "The bottom line is that Apple is not a good partner," said Yankee Group’s Goodman. "They have tremendous products and marketing. But if you’re a partner, you’d better put your hand on your wallet. I haven’t seen a deal yet where Apple hasn’t come out of it smelling like roses and its partners have had to bear the brunt."