Having swung too far towards pessimism, the industry is now becoming cautiously optimistic about 3G, says Tony Thornley, the president of Qualcomm, the firm that pioneered the technology that underpins all of the various technological flavours of 3G. Qualcomm has announced that it is having trouble meeting demand for W-CDMA radio chips. “As we get very near to seeing these things become a reality, we become more optimistic about what 3G can deliver,” says Peter Bamford of Vodafone, the world's largest mobile operator. So now that it is finally happening, how does the reality of 3G stack up against the original vision?

Less data, more voice
That depends upon whom you ask. Mr. Bamford, for example, denies that there has been any downgrading of the original vision. But he is at the most optimistic end of the spectrum, a view reflected in Vodafone's reluctance to write down the value of its 3G licences. Most observers agree that there has been a shift in expectations about how 3G networks will be used, away from video and other data services and towards traditional voice calling.

“Three years ago, everyone was talking about video-telephony,” says Mike Thelander of Signals Research Group, a consultancy. But while video-telephony sounds cool, the evidence from early 3G launches in Japan, South Korea, Britain and Italy is that hardly anybody uses it. Market research suggests that women are particularly reluctant to adopt it, says Mr. Cole. Nokia's first mainstream 3G handset, the 7600, does not even support video calling, but nobody seems to mind…

But operators must price their bundles carefully, and distinguish between peak-time and off-peak minutes, to avoid getting caught out. Offering generous bundle deals may, for example, cannibalise revenues from their most valuable customers, who will quickly switch to a better deal. Operators also want to avoid having to spend money adding expensive base-stations to the busiest parts of their networks to handle peak load. And, of course, they want to avoid a price war. Although everyone agrees that the advent of 3G will cause the price of voice calls to fall and margins to decline, operators are in no hurry to cut their prices before they have to.

But there are signs that Hutchison 3G, a new operator that has launched 3G services in several European countries under the “3” brand, is already leading the European market down this path, notes Mr Thelander: in some cases, 3 offers voice calls for a fifth of the price of its rivals….

It would be a great irony if, after years of hype about data services, the “killer application” for 3G turned out to be boring old voice calls. In truth, however, nobody talks about killer apps any more. This reflects the realisation that 3G allows operators to offer lots of new services—music downloads, cheap voice calls, wireless broadband access to laptops—but that the appeal of these services will vary widely from one group of customers to another.