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Gambling fever spreads to cell phones

Cell phones are slowly being turned into one-armed bandits, a panel at the CTIA industry trade show is told.

LAS VEGAS--Cell phones are slowly being turned into one-armed bandits, a panel at the Cellular Telecommunications and Internet Association (CTIA) industry trade show here was told.

In Germany, cell phone users punch in a few numbers and play the lottery; parlaying a trifecta at the Hong Kong Jockey Club is also only a telephone number away; and in London one of the world's largest online betting companies, Eurobet, offers a tutorial on how to turn a Nokia phone into a betting machine.

Sweden's Net Entertainment, an online casino developer, is launching a wireless casino game for WAP (wireless application protocol)-enabled phones, some of which have already hit the market. And in the United States, a family-owned business in Colorado called is testing a way to play blackjack and draw poker for cash winnings--all from a cell phone.

Gambling on the Internet is nothing new. It's part of an adult entertainment industry that Jupiter Research analysts say reaches upwards of $6 billion a year. It was only a matter of time before the wireless Web caught gambling fever as well. These wireless gambling sites have appeared relatively unnoticed amid the chaos of a young industry distracted by its own growth.

Alan Reiter of consulting firm Wireless Internet & Mobile Computing said the wireless industry has yet to really face the issues surrounding gambling. There are questions about what controls should be put in place, if any.

There are also the murky legal waters of whether a company in the United States, where gambling is for the most part illegal, can even offer such a service. The panel at the CTIA annual convention is likely the first to try and address such issues about adult entertainment.

It was also arguably the most controversial panel out of dozens of others that tackled topics like mobile commerce and how to bill a customer for content. In fact, sources said, the CTIA at first didn't want to convene the panel, but ultimately relented.

"Unfortunately we haven't solved the problem," Reiter told a crowd of three dozen. "But this is at least a start."

One of the panelists was Richard Ekstrand of Rural Cellular, a provider with 600,000 customers in 14 states. His company generated about $356 million in revenue last year.

Rural Cellular is among the group of smaller providers that is feeling the pinch of dropping cell phone rates and hoping to make up for it with new services. The pressure to find new revenue sources, Ekstrand said, is very real. Entertainment and even gambling are viable alternatives, he said.

Because of their small size, Rural Cellular and other smaller carriers "can be more creative, more aggressive," with their content offerings, he said.

Ekstrand said he hasn't been approached by content providers to offer gambling, but he is expecting the day to come.

"Frankly, I don't see what's wrong with it," he said. "It's real. People are going to demand it. By making it available, are you encouraging people to do it? No. You still have a choice."

The lesser of two evils
Ekstrand is facing his own choices, too. Given the option between offering porn, which is growing in popularity on the wireless Web, or gambling, he'd choose gambling. It seems the more socially acceptable of the vices.

"It's easier to deal with gambling than porn materials," he said. "It's kind of like the argument between marijuana and alcohol. One is illegal. The other is not. One is more socially acceptable. The other is not."

But others aren't so accepting. Ray Soular, chairman of SafeSurf, a Web filtering company, is asking wireless sites to start offering ratings, along the same lines as how movies are rated. The same type of rating system never worked on the Internet, where the number of Web sites swelled into the tens of millions.

But the number of wireless sites is still at a manageable level, so a rating system wouldn't be too late, Soular said.

Charles Gertech, a director at consulting firm Mainspring, said wireless gambling presents the wireless Web with the "classic Internet problem" of whose laws govern what actions.

Because a consumer in America can access a Web site run in London, for example, what laws apply? Is it the United States' strict gambling rules or Britain's? The same type of issue was central in a legal case against Yahoo, when a French court said it was allowing the sale of Nazi memorabilia, which is illegal to do in some countries.

"That issue is not over, by a long shot," Gertech said.