If a San Diego researcher's predictions come true, streaming video over wireless devices will be a red herring in the next couple of years.

Why?

The rollout of broadband services has been "embarrassingly slow" and the penetration of handheld devices in such major markets as the United States is low, researchers at the Larta technology firm say in a report titled "Hollywood Unstrung."

As for rich, streaming content, there's nothing to watch. Venture capitalists aren't pumping money into content-producing companies that could make streaming video a hit, Larta reports.

"Despite the large amount of media buzz directed at the impending revolution in new-media content and new communications technologies, penetration rates for broadband Internet access in homes remain quite low," Larta CEO Rohit Shukla said. "Studies of consumers ... show some reluctance to adopt new technologies.

"While Palm devices are the buzz, less than 4 percent of the U.S. population actually owns one today," he said.

Members of the industry were quick to shoot down Larta's findings. They say cellular companies have perhaps been too busy targeting professionals, and haven't shown consumers how these devices could be used for entertainment purposes like watching video clips or playing games. As a result, penetration rates among the general public remain low.

"My feeling is you need to see mobile multimedia to believe it," said Robert Tercek, president of wireless technology firm PacketVideo. "Of course this is going to happen."

Tercek first learned of Larta's study at a conference. He said Larta made it sound as if no one could stream video today, although PacketVideo has built its business around it.

The company makes money by licensing its technology to network operators so they can offer streaming video to their customers. PacketVideo isn't banking on creating content, but Tercek says he can see how carriers can make money off it -- either through advertising or charging customers for an "added feature."

"The business model for streaming video is better than the business model for wired line (communication)," Tercek said. "As we all know, where voice goes, data follows and where data goes, multimedia follows.

"It's a question of when."

Larta Chief Operating Officer Victor Hwang, one of the authors of the report, is, ironically, asking that very question.

He echoed Shukla's concerns that limited bandwidth and content, low penetration rate of devices and a conflict of technical content-delivery standards are inhibiting the growth of wireless entertainment.

And he didn't see a better prognosis in the foreseeable future, either. Entertainment over the desktop Internet -– the No. 1 way U.S. Americans access Web content -– has been a flop, he says.

"We are about seven years into the Web and there is not one profitable company that produces rich-media content," Hwang said. "The amount of money the carriers and wireless developers will invest is going to be so large that it will take years before they show a dime of profit."

However, Hwang acknowledged that business applications like instant short messages, stock quotes and sports scores have proven popular among cell phone and personal digital assistant users.

He also didn't rule out that streaming video will make it, initially in the form of a few minutes' worth of video, such as a movie trailer, advertisement, game or cartoon vignette like those featured on Icebox.com.

Games have successfully brought in users in the past. Gunnar Tyrsing, CEO of an Ericsson-funded wireless entertainment company called Red Jade, noted that the sticky application for Japan's popular i-mode service was games.

"As i-mode grew, more gaming applications were entered into the service," Tyrsing said. "People just loved them. So users wanted the phones.

"I think it's the same in the whole wireless industry.... (Industry leaders) often forget to ask the 15-to-25-year-olds what they want, or how they perceive wireless technology," he said.

Red Jade is building wireless entertainment devices that will include a slew of applications for the 15-to-25-year-old market, which could include chat capabilities, instant messaging and video games.

The company doesn't have a date for the release of its first products. But they're not alone in struggling to move with the times.