Betting on a Jackpot from Virtual Gaming


Gambling in Britain has long been associated with betting shops -- dreary, smoky rooms populated with shabby older men clutching cigars and wagering slips. But with the advent of the Internet, online gambling on everything from sports to soap-opera plots has become a chic pastime for young, affluent British professionals.

The Brits aren't alone. Across Europe, interactive TV and new mobile phones equipped with wireless application protocol (WAP) let those so inclined place a bet anytime, from anywhere: work, supermarket, car, or soccer match. As the technology becomes more sophisticated and wagering gets faster and easier, virtual betting could emerge as a mainstream pursuit, much like the lottery, which is regularly played by 90% of British adults, says Damien Blenkinsopp of British e-consultancy Decipher.

LINING UP. Eventually, I-TV and WAP technologies "are going to be interesting platforms" for betting worldwide, predicts Mark Finnie, gambling analyst at Deutsche Bank's British branch. And gaming companies are lining up to try to grab their share of the virtual pie, which Decipher estimates will grow from $1 billion in worldwide revenues in 1999 to $12 billion by 2004. While e-gambling accounts for only 10% of global gaming revenues, excluding lotteries, it's still the fastest-growing segment of the industry, says Marc Falcone, a gaming analyst at Bear Stearns.

The world's largest online-betting businesses -- many of them with British roots, such as William Hill, Ladbrokes, BlueSquare, and Coral Eurobet -- have all invested heavily in I-TV and WAP-enabled betting technologies over the past year. I-TV allows users and viewers to bet using a TV screen and a remote control, while WAP allows users to access the Web instantly via a mobile phone or other handheld wireless device.

Ericsson and e-commerce-application service provider Netalone are offering mobile-gambling services in Sweden and plan to expand into Greater China, where betting on horse racing is one of the few legal forms of gambling. France's Pronostix offers betting with WAP-enabled and Palm devices. Swedish company ATG, in partnership with Ericsson, offers mobile-Internet betting for horse racing across the Continent. Although none of the companies are making money yet, they're all betting that these investments will pay off handsomely.

3G PAYOFF? After all, both I-TV and WAP phones play to European habits and skills. While Americans love their PCs, Europeans love their mobile phones. In some countries on the Continent, you can buy a Coke by pointing a cell phone at a soda machine. And the British can't seem to get enough of interactive "telly," which will come very close to reaching 100% of the nation's homes by 2010, Decipher says. Mobile and WAP-enabled phones will boost Net penetration to nearly 90% of Western European households by then, with mobile Internet use likely to spread faster than I-TV, Finnie says.

The payoff could come in just a couple of years, analysts believe, as I-TV grows more prevalent and wireless networks are updated to next-generation 3G technology. If 3G can indeed deliver streaming video and superfast mobile-Internet access, on-the-go gambling services could really get hot, Blenkinsopp says.

With I-TV, for example, a group of buddies watching a game together could use the service to place bets against one another, forming their own betting pool. Mobile-Internet devices, meanwhile, could be used to gamble at live events: While watching a soccer game, spectators could place bets over their mobile-Internet phones rather than wait in a queue to use a regular phone, Blenkinsopp says. Online betting is especially appealing to those who crave privacy: A gambler using a WAP-enabled phone could make a wager simply by punching buttons.

SLOW AND UNRELIABLE. A ticket to riches, right? Not so fast. Both I-TV and WAP services are plagued by technical glitches. WAP is notoriously slow and its connections unreliable. Taxation questions loom large as well: To avoid making its customers pay levies of 9% on their winnings, Ladbrokes.com has relocated to the offshore tax haven of Gibraltar. Many other sites are moving to the mecca of offshore gambling, Costa Rica, as well as to Belize or Antigua.

More troublesome still, the legality of online gambling has yet to be resolved in many countries. Australians, for example, took an early shine to online wagering, but now a crackdown is under way, with the government considering some restrictions. Beijing prohibits most kinds of gambling, and people can be arrested for placing illegal bets online, says I. Nelson Rose, a law professor at Whittier Law School.

In the U.S., gambling sites are prohibited by the Wire Act of 1961 from operating within the country, and some states, such as California, ban the placing of online bets as well -- even if the sites are foreign-based. But that hasn't deterred eager gamblers in other states, and some critics say the Wire Act is inadequate for the Internet Age.

Some legislators hope that e-gambling could be crimped if Congress, as expected, takes up legislation this year to explicitly make the operation of online-gaming establishments illegal in the U.S. But once the technology grows more reliable in other parts of the world and the rules of online wagering are clarified, companies stand to post winnings. In fact, you can bet on that. By Olga Kharif in New York


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