Cellphone carriers are luring us into a mobile multimedia future where superphones that double as personal digital assistants (PDAs), internet terminals, MP3 players, business card scanners and video cameras turn us into walking technoholics.

As mobile voice becomes pervasive and affordable both Telecom and Vodafone are looking to data, specifically internet access, to add value and beef up their revenues.

The ultimate goal is to move us from first generation networks to more efficient third generation (3G) digital packet switching so smart phones and mobile devices can shift data at speeds up to 2Mbit/sec.

Text messaging has started a chain reaction. We’re about to be inundated with mass marketing to get us to participate in the ramp up which will involve new phones and higher charges each step of the way. .

Gartner Group believes wireless internet will have a billion users by 2005 and suggests phones with the capabilities of a pocket PC will drive exponential growth. International Data Corporation (IDC) is convinced internet connected mobile devices and m-commerce are the next big thing, expecting 419 per cent annual growth in mobile revenues from $US29 million in 2000 to more than $US20 billion by 2004.

The humble cellphone is becoming an indispensable part of our lives as we seek closer contact with family members, business associates and customers wherever we are. Locally mobile penetration is over 60 percent –skyrocketing possibly to 90 per cent by 2005. That’s up from only 10 per cent back in 1995.

Serious penetration began when Vodafone bought GSM operator BellSouth in 1999 and trebled its customer base over 12 months. It introduced pre-paid phones and dropped prices forcing Telecom to lift its game. Today Vodafone has over 900,000 GSM digital customers, and Telecom has more than a million - around 300,000 on its digital service.

Both carriers are now operating next step networks. Vodafone launched its general packet radio service (GPRS) network late last month and has designated New Zealand as a global centre of excellence to test the way forward to 3G.

It has partnered with Clear Communications and TelstraSaturn to resell its business-based mobile services including transport and despatch systems, tracking and logistics and mobile workforce productivity, typically accessed from a hand held computer connected to a GPRS phone. A major shortage of phones is slowing the uptake but mobile devices with GPRS chips will soon open up new opportunities.

Telecom, having invested $200 million, last week launched its cdma (code division multiple access) network. Subscribers can take advantage of secure transactions, custom built business applications, email, news, weather, games, entertainment, what’s on, horoscopes, share prices and a pay per use web portal.

Telecom has so far upstaged Vodafone with the cost of downloads. Vodafone’s casual rate is $30 per Mb, or up to 30Mb within a $190 monthly plan, compared to Telecom's casual rate of $8 per Mb or a monthly plan of 70Mb for $100. The pricing war is complicated by the need for speed. Telecom’s cdma (14.4kbit/sec) is faster than Vodafone’s existing GSM network (9600kbit/sec) and has stronger in-building and sea coverage. Even its next generation service has an edge over Vodafone’s GPRS, delivering only 20-40kbit/sec compared with up to 100kbit/sec for Telecom’s cdma1x upgrade to be launched later this year.

To date there are 537 million subscribers using GSM phones, mainly in Europe - with 313 million likely to be sold this year. For cdma, strongly focussed on the US, there are 90 million subscribers with 75 million handsets sales predicted this year.

There are many distractions in the alphabet soup of acronyms and sci-fi promises. For now greater awareness of global trends, fear of built-in redundancy and a slowdown in the tech markets is fuelling a healthy scepticism.

Around the world telcos and equipment manufacturers are under serious financial pressure as they slash staff numbers, restructure and refocus. They’ve invested hundreds of billions for 3G spectrum rights, now they must build the networks in an uncertain environment. Warning: major consolidation ahead.

While Telecom and Vodafone have their eyes fixed on 3G nirvana they also have a billion dollar challenge to cover New Zealand’s rugged terrain. That’s unlikely before 2005.

There are also difficulties for those committing to next step networks. Which carrier offers the most useful solutions to real world problems at the best price? There’s no doubt the world wants to go wireless, but what’s missing is a killer application to drive things forward.

And how do we sort hype from reality when even the technologists, telcos and equipment manufacturers can’t agree on where it’s all going? No-one wants to invest in applications that run on one platform only to find their customers and business partners are using the other flavour.