With customers failing to embrace 3G, sector executives hope advances in internet technology, TV and music will sway punters, writes Mike Butcher in Barcelona.
Faced with 50,000 people, about 1,000 exhibitors and eight aircraft hangars packed with the latest mobile technology, it's a wonder anything actually gets done at the mobile industry's trade show, 3GSM. Just walking around the conference in Barcelona this week means pushing through several thousand business executives.
But, somehow, business does get done and the buzzword on everyone's lips this year is content, 3G, Wi-Fi and "IP networks" - or internet-based mobile communications to those in the know.
Admittedly much of this sounds similar to last year, when mobile executives strolled the Croissette in Cannes, before 3GSM moved to Barcelona this year because of space constraints.
Third-generation networks have been threatening to excite consumers with video and music since the licences were bought in 2000 and 2001.
But so far mobile phone users have failed to spread their wings from the usual voice calls and text messages on normal networks.
As a result, the global mobile phone industry faces a problem. Revenues from voice calls and texting in highly developed mobile economies such as Sweden and Denmark are plummeting, as competition bites and consumers fail to fall for premium services like mobile TV.
Even as the mobile industry enjoyed fireworks at the opening night party, analysts at Strand Consulting came out with research which found that while many mobile players are looking to emerging markets in India, Brazil, China, Pakistan and Bangladesh, growth there will take time. The average user in these markets spends less than $5 (€4.20) a month on mobiles.
However, such questions didn't seem to bother most executives as the hospitality stands buzzed into the evening.
As usual, the 3GSM show features a plethora of announcements. One of the big surprises was the news that British Telecom, Microsoft and Virgin would launch a Windows Mobile smartphone designed to display mobile TV using digital audio broadcasting (Dab) technology rather than a 3G network. The move is undoubtedly canny on Virgin's part. As a mobile virtual network operator (MVNO) it doesn't have access to a 3G licence, but by using Dab, it can deliver a 3G-like experience.
The trilogy incorporates Windows Media Player, MSN Messenger and Internet Explorer. It shows that Virgin is less nervous about getting into bed with Microsoft, whose 200 million instant messaging users are poised to flood onto the mobile networks at any chance they can get.
It's this prospect that has the potential to turn the average mobile operator white as a sheet. We've all become used to paying to have text conversations. But on internet messaging, no one pays.
In fact the perfect storm against mobile is WiMax - wireless internet over 50 miles instead of 50 metres - and "voice over IP" (VoIP) software from the likes of Skype, Google and the Gizmo Project.
No wonder the head of Nokia's mobile phone division Kai Oistamo said at 3GSM: "With companies like Skype, Google, Yahoo and Vonage and so on, one can firmly say that VoIP has become the topic of the day."
Cue Nokia's announcement at the show of a Wi-Fi enabled handset. Looking like any other ordinary mobile, the phone will switch easily between GSM and wireless LAN. Free calls anyone?
This is not so bad for firms like T-Mobile, which have invested heavily in fixed-line wireless internet access, but not so great for Vodafone, which hasn't.
No wonder then that Vodafone chief executive Aurin Sarin effectively trashed WiMax on the conference floor, saying new technologies like HSDPA were faster than Wimax and that it was "ubiquity which counts".
Mobile operators also plan to get around the potential switch of their customer base to internet-based instant messaging by launching a similar service of their own.
Ironically, Vodafone said it was partnering with Google to offer a mobile search service for its customers, which is tantamount to admitting that customers are tired of being stuck behind Vodafone's "walled garden" portal.
But whether operators like it or not, handset makers are happy to get into bed with the internet giants. Last month Motorola said it would enable users to access Google's search engine at the touch of a single handset button.
Meanwhile, the other mantra on people's lips has been mobile TV. A slew of announcements confirmed that both operators and content providers see mobile television as a big opportunity.
This will come in various flavours, from DVB-H (digital video broadcast-handheld) to TV services streamed over 3G networks.
Just as Davos this year obsessed over the growth of India and China, so too has 3GSM been looking eastward. No wonder then that Wang Jianzhou, chairman and chief executive of China Mobile, was somewhat feted by panellists and delegates. A hit song was downloaded 15 million times over China Mobile's network in the past six months, and revenues from mobile music have now overtaken the traditional CD music industry.
Music reared its head again at the conference with the announcement that Napster and Ericsson would finally launch the Napster Mobile service, combining the PC music store with the ability to download music to mobile devices.
This includes ring tones, master tones, images, wallpaper and video content.
The fact that the 3GSM has entered the big time, hitting a bigger city and spreading itself out, reflects the divergent nature of the industry as each player goes off on its own direction towards the mobile future.
However, whether any of this activity will be enough to attract the interest of consumers remains to be seen.
A survey among British consumers released by YouGov for Netonomy just before the 3GSM conference found 3G mobile phones were uninteresting and hard to use.
Nearly 80 per cent said the services were confusing and unwieldy - up from the 71 per cent recorded a year ago.
Most 3G users said they admitted to only rarely using special applications and services.
So it remains to be seen whether the wider public will like or loathe their new mobile toys this year.
