With the mobile phone experiencing explosive growth in usage over the last few years due in part to cool new capabilities and the lower cost of handsets, carriers—also known as mobile network operators (MNOs)—have found themselves in a fierce battle for customers and their dollars. As customers, termed "subscribers" by the industry, jumped from one carrier to the other in search of the best deal or the newest phone, MNOs found themselves primarily competing on calling-plan prices and features such as more minutes, cheaper minutes and free nights and weekends. MNOs have fought to counteract expensive customer loss, only to be hard hit as the advent of number portability stymied their attempts to increase average revenue per user (ARPU) and improve customer loyalty.

Faced with the commoditization of voice and a highly challenging competitive environment, MNOs have been quick to embrace offerings—such as mobile entertainment and data services—that can potentially improve customer experience and increase loyalty.

Mobile entertainment is a term that encompasses many things—ring tones, games, text messaging, phone screen graphics, news alerts and instant messaging among others. Also known as value-added services or premium data services, mobile entertainment allows subscribers to both personalize their device and communicate with family, friends and colleagues. Beneficially for MNOs, value-added services are largely specific to a particular handset—when someone downloads a $1.99 ring tone or $5 game onto their handset, it stays there and cannot be transferred to another phone. Subscribers are less eager to abandon their investment by switching carriers.

According to leading industry analyst firms, there's serious money to be made for both MNOs and others that enable mobile entertainment services.

While figures vary, analysts estimate the global market for total mobile entertainment services revenues in 2004 was $16.9 billon (not including voice minutes). By 2009, that number is estimated to jump to $46.8 billion, and industry pundits believe that may even be low. If this seems extreme, consider that avid users of mobile entertainment services can easily rack up quite a bill at $2-$3 a ring tone and $5 a game. Thus, MNOs are finding value-added services both a boon to customer loyalty and the quality of customer experience as well as a lucrative revenue stream.

In the U.S. today, approximately 17% of subscribers use premium data services, a number that is expected to grow substantially as more become familiar with mobile entertainment. This is where good old-fashioned marketing comes into play. Carriers have created hard-driving promotional campaigns to increase awareness and trigger usage of these services, such as the ability to download the latest song from your favorite band to your phone before it is released, vote for your favorite character on TV or see an ad in a magazine and enter the sweepstakes via your mobile handset.

With the market for value-added services still in its infancy, companies such as Qpass are only beginning to leverage the myriad of available opportunities to build successful businesses, making mobile entertainment a reality. Qpass software enables the profitable transaction of mobile entertainment commerce by allowing carriers to create content offers, bill for content, receive payment and even handle customer care issues if they arise, ultimately leaving them to focus on driving revenue.

In the years ahead, we will see the convergence of landline phones, iPods, PDAs, credit cards and much more into the mobile phone as capitalist fervor and creativity combine to launch this industry into new territory.