AS Microsoft’s Xbox and Sony’s PlayStation 2 vie for the attentions of on-line players in living rooms everywhere, the first portable console with Internet capabilities is being released by a surprising source – a phone company.

In February, Nokia will launch N-Gage, the first-ever phone and gaming console in one. Like Nintendo’s Game Boy Advance, N-Gage games will be available on small cartridges, but the system also has a Bluetooth chip that allows players to go head-to-head over short distances and offers Internet gaming through local cellular phone networks.

Nokia spokesman Keith Nowak is adamant that N-Gage was not designed to compete directly with the GBA; he says it’s simply the pioneer in a new product category Nokia has dubbed ‘mobile game deck devices.’

The unit comes with a full-color display, stereo sound and a vibrating function. In essence, it looks like a handheld gaming console that has a lot of extra buttons, obviously so it can function as a phone. Combining a game console and a phone seemed a logical step, Nowak says, as games have been on cell phones for years, and the technology to use operating systems to download new levels and play on-line has already been widely adopted.

Like any platform, the key to N-Gage’s success will be the quality of its software and the number of game titles Nokia can line up. The company has partnered with game giant Sega and a number of other developers to create a host of titles that will be produced and distributed by Nokia. Details about the games and the N-Gage itself, including release date and price, are being kept tightly under wraps until February.

One small snag in Nokia’s game plan is its inability to sell the console in Japan, a major international gaming market. Japan uses unique PDC technology to operate its domestic mobile phones, while Nokia produces phones with GSM technology because it’s what most of the world uses. At press time, Nokia had no plans to develop a PDC model.