updated 2/26/2004 10:23:47 PM ET 2004-02-27T03:23:47

Now that a new wave of “3G” cell phones equipped for streaming video and multimedia content is finally arriving in Europe, the industry is focusing on the next big unknown: what services users will pay for, and how.

The mobile phone services on display this week at the 3GSM World Congress industry show in this French Riviera town has ranged from video games to tennis to the hit reality TV show, “Big Brother.”

Alcatel SA, the French producer of telecommunications equipment, announced a deal with cable channel Eurosport to develop sports TV for mobiles and offer it to wireless operators later this year. Eurosport already broadcasts in 18 languages, and business development director Arjan Hoekstra said it was well placed to pipe sports coverage to mobile phones around the world.

“It’s a question of whether the consumer’s ready to pay for it,” said Hoekstra. “Nobody really knows — but we certainly hope so.”

Although some multimedia services based on third-generation wireless technologies, also known as 3G, have been introduced in Japan and South Korea, many innovations in the pipeline will be tested on real consumers for the first time in Europe — offering a flavor of what’s over the horizon for U.S. consumers.

Entertainment updates
Eurosport is closely following the example of a 3G operator called 3, which recently began selling downloads of Premiership football highlights to British fans. The same operator has also been streaming live 24-hour coverage of “Big Brother” to its Swedish subscribers since last month, selling 60,000 sessions in the first two weeks.

“I don’t think you’re going to watch an entire tennis match on your mobile phone, but you will watch the highlights and maybe the interviews with the players afterward,” Hoekstra said.

Alcatel also announced a deal Tuesday with software developer VRTVStudios in multimedia messaging services, or “MMS” — the multipurpose sequel to short messaging services, or SMS, which has proven hugely popular in Europe.

Instead of thumbing out a text message as with SMS, users can send messages with various forms of content such as pictures, video, animation, music and voice-overs.

“Every user can become a publisher of content via a simple MMS,” said Patrick Parodi, head of the Alcatel subsidiary running the program.

Money in mobile games
Others are putting their money on mobile games as the next big earner to supplement operators’ subscription revenues.

Paris-based Sofinnova Partners, which manages $635,000 in high-tech investments for pension funds and insurers, has placed $41 million over two years in Esmertec, which makes components used by phone makers to make their handsets compatible with games and other applications written in Java code.

Sofinnova associate Olivier Chapel said that as Java progresses from high-end to mid-priced phones, it will tap massive “latent demand” for games in the 12-25 age group — an underestimated market until SMS and ringtones took off.

“Nobody believed in that business, but it has developed very fast because the demand was there,” Chapel said.

Analysts say the content market will get a further boost when wireless payment technologies enable mobile users to buy their games, videos, or music from vendors without the wireless operator as intermediary.

Perhaps surprisingly, leading wireless providers are backing the idea. Vodafone, Orange, T-Mobile and Telefonica Moviles said Tuesday that technical work had finished on their Simpay payment system, due to go live early next year.

Under Simpay’s guaranteed payment scheme, customers will be able to buy digital content from any provider and pay for it on their next mobile bill, with purchases initially limited to $12.70 each.

“Operators realize that a vibrant off-portal market is very important for making their own services better,” said Simpay CEO Tim Jones. “They can then cherry-pick the best for their own portals.”

Arun Sarin, the head of Vodafone, the world’s largest wireless operator, said the quest for hot content would lead to changes at the company, but insisted it had no ambition to produce its own mobile entertainment through expansion or acquisition — possibly a reference to speculation his company might try to outbid Comcast Corp. for Walt Disney Co. following Vodafone’s failed bid for AT&T Wireless.

“You will see many more people at Vodafone working with the content providers, with music companies, video companies and IT companies, that’s for sure,” Sarin told a Cannes audience of delegates and journalists.

But Vodafone would stay firmly in “the enablement business,” he added, “not signing up Outkast and all the other new artists out there.”

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