The Cold Facts of WIRELESS : Grandiose visions of a third generation are coming unraveled.(Forrester Research predicts General Packet Radio Service is best bet for the future)(Statistical Data Included)

Of all the new, new things that came to seem old over the last year, the near hysteria around the "mobile Internet" in Europe was in a class by itself. Techno-gurus and telecom companies proclaimed the coming of a "third generation" of mobile telephones in the next two to four years. They would offer broadband data speeds 100 times faster than current mobile phones. Color screens, streaming video, real-time music downloads and e-commerce ("m-commerce") galore, all in the palm of your hand.

A few telecom companies believed their own hype. Others were afraid they'd be left to die in Silicon Gulch if they didn't race down the trail. European banks anxious to invest in European high tech saw mobile communications as the new El Dorado and anted up $110 billion for licenses. Now, to build the all-new infrastructure that 3G phones require, they'll have to invest an additional $90 billion to $110 billion.

"That is a lot of money," says Lars Godell, a leading analyst at Forrester Research, "and nobody is sure if they can make it work." Godell sent shudders through many 3G license holders last week by predicting a 3G meltdown in Europe. After he and his team interviewed executives at 26 European operators, Godell concluded that the market for a mobile Internet will not even come close to supporting these investments. According to his models, the average revenues telephone companies will bring in for each user will actually fall by 15 percent by 2005. "This will destroy profits, unleashing major business failures and industry consolidation," he says.

The Forrester report at times verges on apocalyptic: angry shareholders will take to the courts, the bond market will crash under the burden of debt, Sony and Matsushita will supplant Ericsson and Alcatel as leading handset manufacturers. Many license holders think this gloom is overwrought, to say the least. They argue that future markets for 3G cannot be predicted on the basis of prior technologies. But investors are pretty fatalistic.

One striking example: the decision last week by Spanish bank BBVA not to put money into the 3G projects of Spanish giant Telfonica, even though last year the two firms entered into a strategic alliance. Another example: in the past year the stocks of major handset manufacturers Nokia, Ericsson and Motorola have fallen even though sales are up.

Thanks to an alternative technology, however, fast, functional Internet access on mobile phones may be only months away for most Europeans, and a year or so for hundreds of millions of other people from the United States to India and China. This technology is not revolutionary but evolutionary: an upgrade of the existing GSM digital phone services and the hapless WAP data phones, which last spring brought Internet access to mobile phones.

The Global Standard for Mobile Communications (GSM) was slow to take off in the Americas, but with 400 million subscribers it is now the norm in Europe and most of Asia. Global roaming is possible: the same phone can be used in Manhattan, Paris, Hong Kong and even Greenland and Mauritius. Data transmission, though an agonizingly slow 9.6 kilobits per second, is remarkably reliable. The phones work well in almost every corner of the European Union, though some networks have become overcrowded. London can be hellish, since an estimated two thirds of the British population now owns GSM phones. On the Continent, market penetration is usually more than 50 percent.