Using a mobile phone to watch live video broadcasts, to send e-mails, or to download music files and listen to them on the train-last year, all these exciting prospects were held out by telecoms companies in the form of a new technology for mobile phones.

The new technology in question is known as third generation mobile, or 3G. According to telecoms operators, it promises to wring more capacity and thus higher speeds of data transmission from the radio waves.

At present, mobile phones can send and receive data at rates of about 9.6Kbps. With 3G, phones could have ten times or more that rate of data transmission. Operators believe that this enlarged capacity will allow people to perform activities requiring large amounts of data to be transmitted, such as watching live video broadcasts on phones.

The advantages of 3G are not confined to higher capacity on the networks. 3G operates in a different way to today's mobile networks. Existing networks are circuit-switched, meaning that when a call is initiated the operator holds open a "line" for the user's conversation throughout the duration of the call. 3G networks would be packet-switched, meaning that all the data sent across them is parcelled up into little "packets" which are reassembled in the correct order at the receiving end.

This will allow phones to be "always on", and thus continuously capable of receiving data. Because of this, operators or their partners could "push" information out to the phones, sending out marketing messages as the user passes near a certain shop, for instance.

It also means that users would be charged not by the duration of their calls but by the amount of data they use-so playing a video for a short time might cost as much as a long voice conversation.

3G technology will also enable mobile phone operators to know the location of each of the handsets connected to their service at any time, to within a few metres. Location awareness means they could offer various services to phone users based on their whereabouts-so they could suggest nearby restaurants, for instance, or hotels.

When mobile devices are optimised for data, rather than voice, it will be easier to use them in the same way as we use computers at present, such as accessing the internet. That would open up useful services such as being able to book a hotel room electronically, without having to make a voice phone call.

Last year, telecoms operators reasoned that the array of new services to come with 3G would allow them to charge users premium prices, generating bigger profits. That is why they were prepared to pay huge sums for the licences governments offered to use the chunks of radio waves that 3G technology requires.

But as the debts incurred by mobile phone operators in order to gain these licences look ever more crippling, man observers have started to question whether these new services will turn out to be mere gimmicks. The technology will certainly allow such whizzy applications, but will users really pay to play computer games on mobile phones? If not, it could mean that last year's enthusiasm for 3G turns out to be an expensive red herring.

Another problem is that the speeds envisaged for 3G technology may not materialise, which could render some of the more ambitious services, such as live colour video, infeasible. In Japan, early trials have shown that 3G technology may not deliver the kind of capacity needed to play video to many users at a time.

Nevertheless, according to Alan Pyne, a director at the telecoms consultancy Schema, the bearish attitude towards 3G among investors is rather unfair. It is still too early to judge if the new services will appeal because new technologies take a long time to gain hold. Moreover, 3G networks are only now being built, and may not be working until 2003 or later.

"We forget how long other services have taken to get established: the internet was around for 15 years before it became usable on a wide scale...," argues Mr Pyne. Mobile phone operators have taken a battering in the stock market because "the investor community wants its results too quickly".

He points out, too, that operators in many countries needed to buy the new chunks of radio spectrum just in order to relieve the overcrowding on their existing networks. In most cases, the licences bought by operators will enable them to provide services for the next 20 years-a long time in technology terms.

The technological promise of 3G remains the same: always-on phones; location-based services; and relief from the overcrowding on today's networks. Though sceptics doubt the size of the audience for some of these new applications, and whether they will all be possible in practice, there is no way of predicting their success or failure until they have been tried extensively, which will not be for several more years.