Vodafone has cut the speed at which it plans to transmit data over its next-generation mobile phone networks, an industry source said yesterday, dealing another blow to high hopes for the technology.
The lower data speed means the third-generation (3G) networks will be better suited to business applications, such as accessing corporate intranets from laptop computers, than some promised consumer services, such as downloading video clips on to pocket-sized devices.
The world's biggest mobile phone operator has decided to run its European 3G networks at 64 kilobytes per second (kb/s) when it introduces the new mobile Internet service in 2002, the source said. The move would simplify its network construction and save money, the source added.
Analysts had been expecting data rates of 144 to 384 kb/s, and predicted faster speeds last year, when operators spent €120 billion (£94 billion) buying European 3G licences.
Vodafone is still aiming for 384 kb/s but may not get there until 2005/6, the source said.
Vodafone declined to comment.
The move raises questions over how operators will make a profit on what is the most expensive bet on a new technology in corporate history.
"This is just one more piece of news that reaffirms our view that 3G was never going to be about things like video," said Declan Lonergan, head of European mobile phone research at the Yankee Group consultancy.
"Speeds are coming down and down and down and it's getting less and less exciting from a consumer point of view. It's going to be much more difficult for the operators to show what's different about 3G services and why the average consumer should upgrade from a GPRS (general packet radio service) phone."
European operators have been trying to find ways to keep down the costs of building new-generation networks.
Vodafone's decision to launch with the lower speed was one reason why it cut its estimates on capital expenditure over the next two years by 10 per cent this week. The launch speed of 64 kb/s might be even slower in practice if lots of users crowd the network.
Morgan Stanley analyst Paul Brilliant said slower speeds further undermined the argument that 3G would produce significant new services and revenues.
A survey yesterday shows only 4 per cent of people planned to use the mobile internet for shopping. The AT Kearney/Cambridge Business School survey shows the figure has collapsed from 12 per cent six months ago.
Mobile operators believe they can make significant sums from taking a cut of transactions made over the wireless Web.
