At a press conference in Helsinki last week, Finland's

Nokia

(NYSE:NOK) unveiled its new third-generation technology.

The technology is supposed to enable rapid data transmission to cellphones, enabling users to watch videos on their phones, for instance, or hear music or play interactive games. Third-gen phones are remarkably similar to mobile Internet.

For five years now, engineers the world wide have been grappling with a definition for "third-generation mobile technology", but useful development has proved elusive. 3G networks must have tremendous capacity and advanced transmission and reception qualities. The phones must also be able to transmit and receive massive amounts of information quickly, and to have memories large enough to handle and use all that data.

Moreover, the phones have to handle heavy multimedia applications, which requires strong batteries to keep the devices functional for a reasonable amount of time on each charge.

The phones also have to have reasonably large display screens with high resolution and all that while remaining visually elegant, light-weight, and attractive. The price has to be affordable to the masses, as 3G's progenitors see the technology as being widely available, if not the only technology in cellular.

Code 6650 for the wealthy

The device Nokia presented, marked Code 6650, has not been commercialized yet. Its main achievement is it prolonged battery life 140 minutes talking time, which is far less than the norm for today's 2G and 2.5G phone batteries. But it's a significant improvement on the 3G batteries recently unveiled in Japan.

The phones' main flaw is that they were designed for advanced applications such as music, video and games, which soak up power and severely reduce the time between battery charges, to the detriment of the phones' chief role to serve as communications devices between people.

At their press conference at Helsinki's modern art museum, Nokia's chiefs effused about their machine but refused to commit to a marketing schedule. They'd only say that a commercial launch won't before the second half of 2003.

The prevailing assumption among analysts is that Nokia rushed to announce completion of development, but hasn't solved all its problems yet.

One problem it doesn't have is meeting demand. There isn't any, as deployment of 3G networks in Europe is still in infancy. The company quoted assessments by the Europe Information Technologies society, that there will be only 275,000 3G cellphones in Europe next year. That assessment, which looks rather buoyant these days, is based on the assumption that 3G will first be launched in big cities, among a handful of wealthy early-adapter users.

The new post-party era isn't here yet

Since the technology hasn't been commercialized yet, nobody was talking price. But most assessments range from $250 to $750 for the phones. The final price will be set by the operators. The first phones will be expensive, but when deployment expands, their cost will probably be subsidized through usage fees, as usual in the cellular industry.

Nokia's announcement was good news for the European cellular world, but it hardly portends the start of a new era. European operators are far from recovering from their hangovers after drunkenly splurging billions for licensing fees and spectrum, before soberly calculating the odds and ends of the new-gen era, such as costs and demand, and how much they could charge.

Europe's plans to launch 3G during 2002 fell through. Now nobody's really looking at a serious launch before 2005. European operators are besieging the regulators with pleas to defer deployment schedules, to change the structure of the partnerships behind the projects, to lower the prices they'd agreed to pay or to subsidize the establishment of the networks.

Once in a while somebody announces the deployment of a network. Last week it was Austria's

Mobilkom

, which announced the inauguration of services.

But the key problem today is the phones, not the networks. Nor will Nokia's Code 6650 really change matters. Finland's

Sonera

(Nasdaq:SNRA), a pioneer of 3G network deployment, also says it won't be launching 3G services until there are at least two 3G handsets available in the market.

Europeans expect the Sony-Ericsson team to shortly announce a 3G device, which could refutethe charge that manufacturers have yet to prove their ability to develop a standard machine that operates on all UMTS networks.

Baldfaced liars

The chances that Nokia's new phone will land in Israel are miniscule. Nobody sees 3G starting here before the next decade.

There is not a shred of truth in statements by

Cellcom

and

Partner Communications

(LSE, TASE, Nasdaq:

PTNR

) that third-generation technology is close, or about trials taking place this year or next.

Israel's Communications Ministry is apparently the only one in the world that believes Israel can expect deployment of advanced services in a couple of years. Dismissing the opinion of the cellular companies, or anybody who knows a thing about 3G networks, the ministry insisted on auctioning off spectrum for 3G in late 2001, forcing Israel's three major cellular operators to agree to fork over $100 million each for frequencies.

As happened in Europe, the price for spectrum was set in complete ignorance of the value and contribution of advanced cellular services. Unlike the Europeans, though, the Israelis pressed on with the auctions knowing full well of the failure in Europe.

Now the Communications Ministry people are struggling to moderate the damage to the cellular industry, for instance by allowing the companies to pay for frequencies only after they start to actually use them. The ministry is in fact admitting that the timing of its auctions was wide, wide of the mark.

However, despite the ministry's brisk handling of the spectrum, it is dawdling on handling the highly sensitive conundrum of antennas. Third-generation services will require each of the companies to double or triple the density of its antenna deployment. Unless arrangements are reached to share antennas, the result will be unbearable density.

Analysts say that if 3G services are launched within a few years, Partner will probably be first off the bat, by virtue of belonging to the Hutchison-Whampoa group of companies. Pele-Phone Communications lost its opportunity to gain a strategic partner when its parent company, the state-run phone company Bezeq, blocked an offer by a multinational to buy a chunk of the cellular operator. Cellcom has a multinational partner but Bellsouth is dying to shed its business in Israel and Europe, and is unlikely to join Cellcom in a technology adventure to the outer reaches of today's cellular universe.