Mobile firms could face legal action over 3G

The fact of the huge sums paid for 3G could yet come back to haunt mobile investors

As mobile firms face hard times ahead one analyst suggests that shareholders could sue over the high prices paid for third-generation (3G) licences in the UK.

A survey of industry figures released by Quotient Communication Monday found that 86 percent thought that the £22.5bn paid for UK 3G licences was too great. The vast majority -- 92 percent -- believe it will take at least five years for operators to make the money back, with 32 percent believing it will take ten years or more. There has been a great deal of criticism over the huge amount of money paid on UK spectrum and prices paid in subsequent European auctions were significantly lower.

Lars Goddell, telecoms analyst at Forrester Research, agrees that too much money was paid, and believes it could lead to legal action. "Shareholder activism is spreading," he says. "I think that a lot of angry shareholders could start suing the mobile companies, their corporate directors, the advisors who recommended spending so much on 3G, and even the government.

It would not be the first time mobile phone companies have been hit by legal actions. In the US a number of claims are to be filed against handset manufacturers in the US, alleging that phones caused their brain tumours.

Earlier this month, Forrester claimed that European mobile phone network operators would fail to generate sufficient revenue from third-generation (3G) networks and would face a steep decline in earnings by 2005.

According to the Quotient survey the financial success of 3G will dependent on operators providing at least one highly popular service. However, there was disagreement as to what 3G's "killer app" would be. Twenty-seven percent of those interviewed believe that mobile Internet access will be the most important 3G service. Some 21 percent think that a mobile location application will be more important, while a further 21 percent think the killer app hasn't even been invented yet.

Goddell agrees with the last of these scenarios. "I don't believe in the existence of any killer application. With 3G, there are going to be so many services that complement each other", he said.

3G, or UMTS, networks will offer much faster data transfer rates than current GSM networks. They will enable location-based services, better Web surfing and video streaming -- although some analysts claim that watching movies on a handheld device will not be popular.

Goddell points out that the track record of porn sites on the Internet makes them likely candidates for success in the 3G world. "Entertainment services will be key, especially pornography and adult services. After all, they're almost the only people making money from fixed access."

To date, mobile operators have been slow to push the merits of 3G porn This doesn't surprise Goddell. "They don't talk about it in public because they don't want to be quoted. They don't mind discussing it in private," he claimed.

Goddell isn't alone in believing that wireless technology will be used for pornography. A ZDNet investigation in December last year discovered that industry experts and clinical psychologists were concerned that 3G technology could open up a new channel of abuse for Internet paedophiles.

Take me to the ZDNet Road to 3G News Special.

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