LOS ANGELES -- Mobile gaming is a huge business, but the gaming giants have scored relatively few big hits on 3G networks, even though such networks seem to be the perfect place for gamers and a killer business for carriers.

What's the holdup? Several things, actually. According to experts at the Electronic Entertainment Expo (E3), fault can be found with the slow rollout of 3G networks, poor marketing, handset limitations, and the carriers themselves, which apparently haven't perfected their plans to cash in on multiplayer mobile games.

First, there's the services issue. Julie Ask, a wireless analyst for JupiterResearch , pointed out that Sprint Wireless (NYSE: PCS) and Verizon Wireless can reach about half the U.S. population -- 150 million potential subscribers -- with 3G service, and Cingular Wireless could reach another 50 million. But getting people to use the service has been a struggle, with only 1 or 2 million subscribers signed up, she said.

Developers say improvements in handsets would help (more on that later), but they note that fancy features -- WiFi connectivity to a cell phone, or being able to talk via the phone while playing a game -- aren't the answer for games. "There are still a lot of things that need to happen with the technologies we have today," said Eric Albert, head of North American operations for Gameloft .

Would an IP Multimedia Subsystem (IMS) infrastructure be the answer? Not for a while. "That's one of the things that's so far off, a lot of us are not even thinking about it at this stage," said Robert Nashak, chief creative officer for Glu Mobile .

Lincoln Wallen, CTO for the mobile division of Electronic Arts Inc. (Nasdaq: ERTS), said IMS could be immensely useful if it leads to a better quality-of-service (QOS) framework for 3G networks. But more urgent concerns exist.

One of those concerns is that games are poorly marketed and consumers aren't enticed to try playing any game that looks too complex on their cellphones.

"In the short run, merchandising of the games on deck is going to be the big impact," Nashak said. What's more, most users seem to want dumb and simple games -- Tetris, solitaire -- that don't exactly drive revenues. "Why do people play phone games? It's to kill time," Nashak said. "We're still looking at people who want a simple experience, and they're not terribly adventurous."

But the carriers are also to blame, panelists say. Some here expressed frustration with the carriers for being reluctant to let huge volumes of data cross the mobile network.

"They're pushing these high-bandwidth networks, but once you push an application that uses high bandwidth, they start screaming, because they don't have the pricing models out there," said Eberhard Schoemburg, CEO of Artificial Life Inc. Fear of VOIP competition drives some of that, he added.

Along those lines, the Wall Street Journal reported last week that Verizon has sent service-cancellation letters to customers it has pinpointed as bandwidth hogs.

Conflicts could loom, then, as mobile games become more sophisticated, because there comes a point -- as in massively multiplayer games, for instance -- where the game starts looking like a service, Electronic Arts Mobile's Wallen said.

"As more and more games become more and more service-like, you get more and more data traffic. That's not necessarily a good thing for the carrier, because it starts clogging up the network," Wallen said. And it's not "valuable" data for the carrier, not the way a purchase order might be, he added.

The result, he said, is that carriers might start creating detours for data, using other transport means such as the Internet "simply to get the bulk of data off their high-value, high-cost network."

That's all nice and depressing, but it's still important to dabble in high-level features, Albert said, citing Gameloft's three-player, head-to-head version of "Asphalt: Urban GT," a car racing game. "What it's doing for us is not necessarily increasing the market to bigger proportions, but it's keeping the people in that market a lot more loyal," he said.

It's important that handset hardware is improving, too, in terms of higher processor speeds and more sophisticated screens. "When we first had the [3G] network, the handsets were rather slower," said Kyu C. Lee, president of South Korean developer Gamevil Inc. "It really can't give a good experience."

As an example, Lee cited a baseball game aimed at Korea's three 3G carriers -- KT Freetel Co. , LG Telecom , and SK Telecom (Nasdaq: SKM). "The only carrier we could do [the game with] at the moment was KTF, because their handsets were better, he said. "Nowadays, I think handsets have caught up to the pace."

But mobile games are still in that trial-and-error phase while developers learn about the user base and the networks' capabilities. Lee said KT Freetel couldn't help Gamevil with a real-time, multiplayer game, for example, because the network could only support a fraction of the users Gamevil envisioned.

Still, there's reason for developers to hope. Those who buy the fancier handsets are more likely to buy into things like games.

"The content consumption of these devices is a lot higher," with about 11 percent of users buying into games versus 1 percent on regular devices, Gameloft's Albert said. "The revenues we're getting from some of these 3G games are sometimes better than for better games for 2G."

And phone manufacturers are warming up to the possibilities behind games. Schoenburg noted that some phone makers want to make an installed feature out of Artificial Life's V-Girl, a Tamagochi-like "girlfriend" that responds to player messages but gets sulky if denied virtual flowers and gifts (purchased with real money). "The game is the differentiator. That's a huge opportunity," Schoenburg said.

— Craig Matsumoto, Senior Editor, Light Reading