Higher speed technologies for mobile data are on the way or - in a few cases - already here. But creating a mass-market for mobile data, with the corresponding economies of scale, will be much harder than for voice.

General Packet Radio Service (GPRS), a packet-switched mobile data technology, will be introduced by most European mobile network operators by the end of this year or the beginning of next. As a result, many mobile networks will soon offer speeds close to those achieved by today's fixed Integrated Services Digital Network (ISDN) lines.

With the introduction of third-generation (3G) technology around the end of 2002, mobile networks will deliver data between 10 to 31 times faster than today's ISDN lines.

In fact, GPRS (also known as 2.5G) has already started to appear with five network operators running services or commercial trials. They include BT Cellnet of the UK, the first to launch a service on June 22, T-Mobil of Germany, Telsim of Turkey, Mobilkom of Austria and China Unicom.

The introduction of 3G is further off, partly because of the high-cost of building 3G networks - unlike GPRS it is not just an upgrade to existing GSM technology - and partly because of the cost of the licences.

Already mobile operators have paid 10 times more for European 3G licences than they paid for second generation (2G) licences. And there are still countries which have yet to award them.

For example, France is likely to gain nearly E20bn from awarding four licences in a beauty contest next year. Italy is expected to award five licences with a reserve price of E2bn each.

And Austria, Switzerland and Belgium are all slated to begin 3G licence auctions in November, according to the Wireless Internet newsletter.

The higher speeds offered by GPRS and, later, 3G, will allow mobiles to connect to the internet more effectively and a new generation of devices that do everything from playing music to running your life will start to appear.

This will create challenges for the telecoms industry. Hendrik Frenzel, an investment director focusing on wireless investments for venture capital company 3i, says: "The wider choice of end-user devices will reduce the possibility of the kind of mass-market manufacturing strategy we've seen in the mobile market in the past, or it will increase its complexity."

He points out that the cost of the current generation of mobile handsets has been lowered by mass-producing several key components of the phones. In this way, economies of scale have been realised and margins kept high.

But he says: "PalmPilot and Windows CE organisers with integrated mobile technology will not be available at today's handset prices for a long time because of lower demand and the level of technology required."

Although high-end users will pay nearly any price for this sort of device, he says, they represent only a small part of the market. "So Wireless application protocol (Wap) handsets will cover the mass market for the next 2-3 years."

In the future, greater segmentation will be found not just in the devices used to connect to the mobile internet over 2.5G or 3G, but also in the services people want to use.

General packet radio services launch plans of western European cellular telephone operators
	Operator	Launch	Supplier
Austria	Maxmobil	End 2000	Siemens
Austria	Mobilkom	Aug 2 2000	Motorola - Cisco, Nortel
Austria	One	1st quarter 2001	Nokia
Austria	Tele.ring	4th quarter 2000	Alcatel
Denmark	Mobilix	End 2000	Nokia
Denmark	Sonofon	Nov/Dec 2000	Undecided
Denmark	Tele Danmark Mobil	Beg 2001	Ericsson, Nokia
Denmark	Telia	By end 2000	Ericsson
Finland	Radiolinja	Undecided	Nokia
Finland	Sonera	End 2000	Ericsson, Nokia
Finland	Telia	By end 2000	Nokia
France	Bouygues Telecom	End 2000	Cisco, Ericsson, Nokia, Nortel
France	France Telecom Mobiles	End 2000	Undecided
France	SFR	Not disclosed	Alcatel, Nokia
Germany	E-Plus	End 2000	Nokia
Germany	Mannesman	Sep 2000	Ericsson, Siemens
Germany	T-Mobil	Jun 25 2000	Alcatel, Lucent, Motorola-Cisco
Germany	Viag Interkom	Sep 2000	Nokia
Italy	Blu	2001	Nokia
Italy	Omnitel	End 2000	Not disclosed
Italy	TIM	End 2000	Undecided
Italy	Wind	Autumn 2000	Alcatel, Ericsson, Siemens
Netherlands	Ben	2001	Nokia

Targeting services to the right groups in the right way will be a challenge for operators used to selling services to two main groups: business users and consumers.

...continued
	Operator	Launch	Supplier
Netherlands	Dutchtone	End 2000	Nokia
Netherlands	KPN Mobile	End 2000	Nokia
Netherlands	Libertel	End 2000	Cisco, Ericsson
Netherlands	Telfort	Undecided	Ericsson
Norway	Netcom	Early 2001	Siemens
Norway	Telenor Mobil	First half 2001	Nokia
Portugal	Optimus	End 2000	Nokia
Portugal	Telecel	End 2000	Ericsson
Portugal	TMN	End 2000	Alcatel
Spain	Airtel	End 2000	Undecided
Spain	Amena	First half 2001	Undecided
Spain	Telefonica Moviles	End 2000	Undecided
Sweden	Comviq	1st quarter 2001	Motorola, Siemens
Sweden	Europolitan	Autumn 2000	Nokia
Sweden	Telia	2001	Ericsson
Switzerland	Diax	4th quarter 2000	Nokia
Switzerland	Orange	End 2000	Not disclosed
Switzerland	Swisscom	Undecided	Ericsson
UK	Cellnet	Jun 22 2000	Motorola-Cisco
UK	One-2-One	Feb 2001	Ericsson, Nortel
UK	Orange	End 2000	Ericsson
UK	Vodafone	End 2000	Ericsson
Source: Wireless Internet

And the high price paid for 3G licences may mean that the first 3G services are so costly that they inhibit demand.

Mr Frenzel believes that success in 3G will not be entirely dependent on the performance of network operators and handset suppliers, they will also need to consider ideas from start-up companies with creative ideas. Operators may also have to move away from the "walled garden" approach of trying to restrict users to their own mobile portals if they want to succeed with mobile data.

Revenues raised in western Europe's second and third-generation licence contests
	Second generation		Third generation
	Amount (m)	Date	Amount (bn)	Date
Austria	1,130	1996/99	**	Nov/Dec 2000
Belgium	846	1995/98	**	Dec 2000
Denmark	*	-	**	Undecided
France	*	-	***	First half of 2001
Germany	*	-	50.5	Aug 2000
Greece	344	1992	**	Undecided
Ireland	42	1995/98	+	2001
Italy	580	1994	++	Oct/Nov 2000
Netherlands	930	1998	2.7	Jul 2000
Spain	670	1995/98	+++2	Mar 2000
Switzerland	*	-	**	Nov/Dec 2000
UK	*	-	37.5	Apr 2000
Total	9,084	-	92.7	-
* Countries which did not use auctions for second-generation licences
** Third-generation auctions have not yet started in these countries
*** France is not using an auction but has set a price of about E5bn for each of its four licences
+ Ireland is to use a beauty contest rather than an auction to award its third-generation licenses, and will probably allocate four
++ Italy is holding an initial beauty contest followed by an auction with a minimum price of about E2bn for each of its five licences
+++ Spain used a beauty contest rather than an auction to award its four third-generation licenses; licence fee includes an element of company turnovers
Source: Wireless Internet

Richard Deasington of telecoms consultancy Questus says: "Current Wap phones are set to automatically access the operator's portal only and access to an operator's own Wap portal can be up to five times faster than other sites."To gain access to other sites, customers must change the settings though many do not know how.

But Mr Deasington thinks users will eventually put pressure on operators to "open the garden gate to all comers."

3i predicts that: "If operators restrict access only to the services they offer, they will not be able to drive usage up quickly enough to recoup their investment in 2.5 and 3G."