Every bar has a condom dispenser. Why doesn’t every store have a data dispenser? Because you don’t want to shag a computer, of course. But this is an idea that remains largely unexplored.

At 3GSM last week, Nokia tiptoed into a market that one day might be enormous: the “proximity server”. If you’ve attended a tech conference in recent years you might even have used one without giving it a second thought. San Francisco pioneer WideRay has been in the business for five years: it beams the schedule to attendees on demand via Infra Red or Bluetooth. Inside the server is a cellular SIM, which updates itself from the network. But it could beam anything: ring tones today, MP3 files tomorrow. With an increasing number of punters having Bluetooth phones, the market potential increases daily. When we looked at the idea almost two years ago, it seemed proximity servers could have deep consequences, such as the potential to transform product branding, or at least make the retail experience less daunting for shop-o-phobics.

The problem, eternally, is the networks. They don’t want to cannibalize potential network traffic. But if they don’t take a lead, they might find someone else cannibalizing it on their behalf. We find this issue is at the core of how Nokia and the leading incumbent is approaching the market.

Last November games retailer EB Games introduced WideRay proximity servers into its stores. Now, after years of talking about M2M (Machine to Machine) networks, Nokia has made its move. It’s even, er, borrowed the name from WideRay, Service Point.

Nokia Ventures’ initiative, which it calls ‘Local Marketing Solution’ consists of a server (Service Point LMP 10), management software (Service Manager LMM 10) and a client for Series 60 phones. The demonstration in Cannes this week with Coca Cola beamed details of wallpapers, coupons and other content to attendees’ phones.

“Imitation is the sincerest form of flattery,” WideRay’s founder Saul Kato told us. With the market in its infancy, he said WideRay welcomed the competition. The two had discussed a joint venture but failed to reach agreement over IP issues, he told us.

Nokia’s demonstration this week seems to show some of the limits the company has imposed on itself, however. Nokia’s data dispensers only beam links, not ‘real’ content to the phone.

“They’re selling it through network operators, and they’ve very sensitive to operators’ mentality. There’s no actual content being delivered,” said Kato.

Of course the operators want each individual to use the network, which negates the idea of having a local cache.

“It doesn’t make sense to us. Once you’ve made the connection, just send them the content,” he says. Nor is the initial example particularly compelling – hands up who wants Coca Cola wallpaper? And he doesn’t expect Nokia to support non-Nokia devices with its client software, whereas WideRay supports Palm, Microsoft and all the flavours of Symbian, with Java to follow.

WideRay is focusing on retail, and Kato says he expects retailers to use proximity servers to capitalize on existing loyalty schemes. The business case for installing these boxes is that they could be used to beam vouchers, but in many large retail stores they could also be used to provide navigation or simply easily navigable catalogs. It’s hard not to imagine the high street catalog companies being interested, with phones being used to supplement the giant, vinyl-coated pages of their physical catalogs. In a personal area network, there’s no need for the store to know your phone number, which may comfort shoppers who fear the store might deluge them with text spam.

It isn’t hard to see why EB Games was one of the first to make a move: the young demographic is more likely to have a Bluetooth phone or an infra red PDA, and game downloads are a natural complement to the in-store merchandise.

When we covered WideRay two years ago, we allowed ourselves to speculate that because the boxes can remove the need to browse the shelves, it removes the need for companies to spend so much on branding to differentiate themselves. Of course this isn’t going to change shopping and marketing so dramatically, if only for the reason that we don’t like staring at phones so intently. But proximity servers may well augment the physical interactions that go on in today’s stores.