UK loses interest in wireless Net

To companies like BT and Vodafone, it's the future of wireless. But consumer interest is declining

Only about three percent of households owning mobile phones in Britain have used the wireless Internet, according to a new study. The new report shows that general interest in mobile Internet applications has fallen during the last year.

JD Power and Associates' latest annual survey of mobile phone use in the UK, released on Tuesday, will bring little good news to British mobile phone networks, which spent £22bn last year to buy licences to "third-generation" wireless spectrum. While many analysts believe the 3G spectrum may eventually be invaluable for supporting the growing number of mobile phone, there is little evidence so far that consumers are interested in more high-tech mobile technologies, like wireless video and mobile Web surfing.

Internet-enabled mobile phones have been on sale in the UK for more than a year now, but only ten percent of mobile-equipped households owns one, according to the JD Power study. Out of that ten percent, only one in three owners had used the Internet functions.

What's more, public interest in the mobile Internet has dropped. At this time last year, 33 percent of the public said they were interested in accessing the Internet on a mobile phone, but this year the figure had dropped to 25 percent.

Wireless networks are in the midst of rolling out next-generation data services, which are considered necessary for the future development of the industry, but have become far more expensive than originally planned. Around Europe telcos will spend about £70bn on 3G licenses, and about the same again to build the 3G infrastructure.

Industry observers are pessimistic that telcos will be able to make the funds back any time soon, and in the meantime, the debt has plunged companies such as British Telecommunications into crisis.

Those in the industry say the mobile Internet can succeed, but has faced a public relations disaster after WAP (wireless application protocol) phones were over-promoted by zealous telcos. "The failure of WAP has been a bitter pill, but it's important that we learn some valuable lessons from it," said Alistair Harvey, portal manager of iTouch UK, a wireless Internet service, at the 3G Mobile Internet Content conference earlier this week.

In general, the picture appears to be bright for the services mobile phone vendors are currently offering -- the number of British households owning at least one mobile phone has jumped to nearly 70 percent from less than half in the past year. Customer satisfaction levels are also generally higher.

However, the growth in sales presents its own problems, since 90 percent of new phone sales in the past year are pre-paid phones. Pre-paid plans mean that the service provider has no way of guarding against "churn", or switching providers. This is particularly important to an industry based on heavy subsidies of handsets.

Pre-paid users also have little post-sales contact with the network provider, which is considered an important way of selling additional marketing messages.

Graeme Wearden contributed to this report.

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