The Isle of Man makes an unlikely first stop in any search for cutting edge technology. The island, with a population of only 75,000, is famed more for its low taxes, annual motorbike race and financial services industry than any internet-age innovation.

But this spring, it could provide the answer to what is, literally, a $100bn question for Europe's mobile telephone giants: will the next generation of mobiles really deliver?

On wind-swept hills around the island, engineers are racing to complete the world's first third generation (3G) mobile phone network, battling against the freezing conditions and even restrictions on their movements because of the foot and mouth epidemic. Their rivals in this contest are thousands of miles away in the Far East, where Japan's DoCoMo is hoping to launch a similar service by the end of May.

Last week, Online was given an exclusive behind-the-scenes tour of Manx Telecom's work on the new network, which is also due to go live sometime that month.

Besides the kudos of winning this high-tech race, whoever lights up their network first will know the eyes of the technology world will be turned on them, looking for signs that there will be the hoped-for pay-off to the gambles that mobile operators have placed on this cutting edge technology.

If all goes to plan, the new networks will allow users to surf the internet proper (rather than just sluggish text-only services) and watch video - even each other - while they are on the move. If it goes wrong, mobile's third generation could drag some of technology's biggest names down with it.

The networks have gambled on advanced mobiles being a hit with the public. Last year's UK auction for radio spectrum to operate these new services made £22.5bn for government coffers, with five bidders winning rights. Similar auctions raked in further billions, often from the same players, around Europe and in the US.

One of the most successful bidders was BT, which owns the Isle of Man's telephone monopoly, Manx Telecom. With 3G licenses now spanning Europe, BT has the most to learn from a successful Manx launch - and the most to lose if doubters are correct.

There are quite a few who think things will go badly. Some say the new technology will not be capable of all that it promised, with base stations struggling to cope with the large amounts of data needed to make 3G work.

Others, citing the problems of the $5bn Iridium satellite telephone network, which went bust in 1999, say 3G handsets will, like Iridium's, be chunky and expensive because of the hefty demands multimedia content will place on screens and batteries.

Worse, some analysts say that even if the technology works perfectly, consumers are likely to be spending less on their mobiles in a few years' time as voice calls are commoditised - not spending considerably more as the 3G business plans demand.

It will be on the Isle of Man that the truth finally begins to emerge, both about the technology and the business side. Not surprisingly, Mark Briers, director of Manx Telecom's UMTS Programme (UMTS stands for Universal Mobile Telecommunications System) is a busy man these days.

Briers is on secondment to Manx Telecom from BT, and that gives a large clue as to BT's involvement here. The island is the perfect testbed for the technology, the services which might be provided over it, and the way it is to be paid for by users.

Showing off Manx Telecom's plans at the company's smart new HQ in the town of Douglas, Briers says he is confident of making what he calls a "challenging" May deadline.

Even if he does, 3G will still start slowly on the Isle of Man. It only has about 30,000 mobile phone users, and at launch, only the south western quarter of the island is likely to be fully served by 3G. Neighbouring areas will follow on soon afterwards, but the initial supply of handsets will be limited to only "a few hundred".

Despite this, Briers insists the Manx launch is more than an experiment or publicity stunt, and that the number of handsets will grow quickly. There are even plans to give them away in a competition for schoolchildren.

"This is a commercial launch," he says. "We'll be doing some work with the network but we're not going turn it off at night. We really want it to function properly."

Briers biggest concern appears to be making sure the new generation phone is sold on the back of the services it can offer, rather than improved data speeds or other high-tech credentials.

"We need to get into the content space to make it exciting," he says. "We need to be talking about services rather than '3G' or 'UMTS', as proved by the problems with Wap.

"The message at Cannes [where a major mobile con ference was held last month], despite the very technical audience, was 'let's stop talking about the technology'."

But the content is, in some ways, inseparable from the technology. Today's mobile phones are choked by a slow connection of, at most, 28kbps, which means even text-only information arrives slowly. The 3G network on the Isle of Man will offer a maximum download speed of 384kbps, and 64kbps up, at launch. That is still much less than the 2Mbps promised amid the 3G bidding hype last year but, at this stage, a realistic target, says Briers.

In content terms, that means you will be able to receive moving video clips and hold videoconferences between 3G handsets. What Manxmen will not be able to do, however, is watch live TV on their handhelds, at least for the time being. There is still a limit to the number of simultaneous connections the 3G masts can support at the maximum speed of 386k.

However, they will be able to send each other video clips and files at higher speeds than before, teleconference and play games, thanks to a partnership with online gaming company Gameplay. BT Openworld will chip in with video content and "enhanced Wap" services. Plans for mobile office applications are also in the pipeline.

And once the launch is out the way, the project moves on to the other half of the 3G problem - making money.

One feature of 3G will be its ability to work out exactly where users are at any time, offering what the mobile giants hope will be valuable marketing opportunities.

Manx hoteliers and shopkeepers could suddenly find themselves in the vanguard of the location-based marketing revolution as passers-by are offered cheap hotel rooms or discounts on the island's famous three-legged chocolate figures over their 3G mobiles. With the network able to take a cut of these "m-commerce" transactions, "the technology gives us a lot of interesting options," says Briers.

But, before all that, the hard work of building the new 3G network must be completed. Several new masts - including one atop the Isle of Man TT Race grandstand - have been installed, winning praise from locals for being more discreet than their predecessors.

Building the network has not been without headaches, some caused by occasional cultural differences between members of the multinational team of engineers.

"A team from our Japanese partners came over with the first base stations on December 19," says Briers. "We discovered that they didn't stop work for Christmas, so a few of our team only had a day off, which caused a few grumbles," laughs Briers.

He will laugh even harder if, come May, that turned out to be his only headache in this high profile project.