Close-Up: Live Issue - Can 3G really be the next colour TV?

Operators say the new generation of mobile phones will drive a media revolution.

According to Peter Bamford, Vodafone's chief marketing officer, the launch of third-generation, or 3G, mobile phone services marks a milestone comparable to the advent of colour television.

While Bamford's hyperbole is predictable, given that Vodafone launched its 3G offering last week, it is worth remembering that in the UK mobile phones are still viewed primarily as a communication tool, as opposed to a source of entertainment. So Vodafone's competitors will be watching closely to see if the company has got its timing right in convincing the public otherwise. The rest of us will want to see quite what Vodafone can offer to justify Bamford's boldness.

The stakes are undoubtedly high. Four years ago, the major mobile operators paid the Government £22.4 billion for the UK's six 3G licences. Hutchison Whampoa's 3 service was the first to launch at the start of 2003 and, despite being beset with teething problems including poor network availability and a shortage of handsets, the signs are that it is now finally on track in terms of customer acquisition. In fact, 3 is now the UK's fastest-selling mobile phone network, having signed up 1.2 million customers from a base of less than 500,000 last year. It aims to achieve a target of two million by 2004.

While it would be an overstatement to claim that interest in 3G has reached a frenzy, Vodafone now clearly thinks it's time to cash in on its £7 billion licence investment with a £15 million ad campaign through J. Walter Thompson.

To claw back its initial outlay, Vodafone plans to charge a hefty premium for its 3G services. For a £40 to £60 monthly subscription fee, it is going to have to provide something pretty compelling to transfer its 14.2 million customers from its old voice network to 3G.

One of the first challenges will be to overcome consumer confusion as to what 3G actually offers. In the UK, there hasn't been much to encourage consumers to see mobile phones as more than just a tool for verbal and text communication. There is a confusing spattering of 2.5G services offering advances such as video calling. The job of the ad campaign is to remove confusion and encourage take-up.

On top of this, Vodafone will need to provide a technologically glitch-free service - something that initially proved elusive to Hutchison - and, assuming that any problems are ironed out, the quality of its content is key to its success. Overnight, then, the mobile phone operators will have to become experts in media distribution, which is no mean feat.

Vodafone's initial fare includes film previews (starting with the new Bridget Jones: The Edge of Reason film, released this month), Premiership football highlights and news bulletins from ITN. Vodafone will also be showcasing some made-for-mobile content including 24 exclusive one-minute "mobisodes" that ape the hit thriller TV series 24.

While some of these issues have already been encountered and successfully challenged in both Korea and Japan, where 3G services have become popular, in the less technologically obsessed UK the future of the 3G market is more unpredictable. But given the amount of money and risk that the mobile operators have already invested in 3G, what will become clear is whether £15 million of spend is sufficient to recoup Vodafone's £7 billion-plus licence investment.

TELECOMS ANALYST - John Delaney, principal analyst, Ovum

"The mobile operators' rationale is that their target customers live and work in towns - hence the initial launch in urban areas. The fallacy with this is that 3G is meant to be a mobile service - it's no good if you can't move about with it.

"One of the main problems that Hutchison had with 3 was that when you were talking on your phone and moved out of an area with the 3G network your call would just drop off. The handset manufacturers now say that they have fixed this problem, and the newer 3 handsets seem to work. But it remains to be seen whether this will affect Vodafone handsets."

CONTENT PROVIDER - Annabel Jones, managing director, Zeppetron

"The 3G platform requires content in very short hits - things that tell you something or make you laugh. People use their phones for immediacy and this needs to be reflected by the content provided.

"It can be used as an extension to TV, with funny or momentous clips from shows being pulled out and sent to people.

"Content has to be simple and short. Watching goals on 3G phones isn't as clear as on a TV screen but it's the moment and not the detail that consumers want.

"Initially people will use the phones for things such as video conferencing, but this will be the hook for them to start relying on their phones more and so using other services."

AGENCY CHIEF - Robin Wight, founding partner, WCRS (agency for 3)

"The launch of 3G from Vodafone, the market leader, is good for 3 as it legitimises the network. It will make people reassess 3G and will grow the market.

"Content is going to allow the brand separation for the networks that has disappeared over the past ten years. Vodafone's content will be very different from 3's, with both focusing on their different brand positioning and markets.

"There is the possibility for advertising on 3G but it would have to be very careful about invading people's personal space. Perhaps there could be lower tariffs for people who agree to receive ads but I don't think advertising is the first thing in the queue for 3G."

MOBILE PHONE RETAILER - Charles Dunstone, chief executive, Carphone Warehouse

"The past 12 months have seen customers really enjoying the benefit of new services and features on their mobile phones, such as video calling, music and video downloads, and gaming.

"Vodafone's launch is the next very exciting development, bringing more opportunity for customers. We believe sales of 3G handsets will really take off next year, as each of the networks introduces its 3G services, and the market becomes more competitive."

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