In an office block on a windswept Isle of Man hillside, a small team at Manx Telecom is quietly, politely, attempting to set a few records straight. Their point? That the next generation of mobile phones really will work.

A steady stream of journalists, analysts and industry colleagues has braved the choppy flight across the Irish Sea to visit the Manx men and women who are among the first in the world to try to get 3G technology to work outside the lab. Manx Telecom is owned by mm02, the mobile operator formerly known as BT Cellnet, which has a hefty stake in the success - or otherwise - of 3G.

And the news is: yes, the technology on which $66bn has been gambled in Europe does go, albeit on a very small scale. There are just 50 handsets working in an island-wide trial today, although that is due to rise to 200 by the end of this month. But Mark Briers, director of Manx Telecom's UMTS Programme, is quick to point out that some experts doubted they would even get this far. What's more, he is also telling stories about the locals who are putting their new-found mobile power to use. One early adopter has been a local estate agent now sending photographs from clients' homes to his company's website "in seconds", from a living room, rather than having to drive 15 long island miles to upload them. That, says Briers, is saving him hours - a fine example of where 3G will do well when it eventually makes the mainland.

And in the Manx Telecom demonstrations, 3G's speed certainly seems impressive. In one room five identical laptops - each running a different kind of internet connection - are racing each other. Asked to download a typical web page, the laptop hooked up to an NEC 3G mobile phone is vastly out-performing one connected to a current second generation GSM mobile. It is also much faster than the 56k modem laptop - which represents the means of connection for most surfers in the UK - and is obviously faster than ISDN. Only ADSL, 10 times the speed of the 56k modem, beats 3G. The websites I choose at random appear quicker than on many corporate networks I've used. To be fair, even with identical laptops loading identical webpages, 3G is still being shown in a light that can only be flattering: with just 50 active handsets, and 24 base stations round the island, the number of users battling for capacity on each base station is very low. Some estimates suggest 28,000 extra masts and base stations will need to be built in the UK alone to get reasonable 3G performance.

And the vast amounts of bandwidth serving the Isle of Man mean there are unlikely to be any bottlenecks between the masts on the island and the internet at large - another problem that might trouble larger networks. But, even given these reservations, it is easy to see the attraction of 3G for laptop users: with 3G, suddenly you could have a mobile connection substantially faster than the one you have at home, as fast as the one in the office. But while Manx Telecom refuses to talk about pricing - all the trial users are on a free tariff for the first three months while their usage is monitored and analysed - it is likely that 3G will not be priced to rival fixed broadband services. Plug-in 3G PC cards for laptops are likely to be popular ways to use the technology, for travelling business people who need their corporate email or presentations from a central server, or online games players who need a quick deathmatch on the move.

And as we drove round the island in the back of a specially equipped 3G van, it was clear that problems 3G developers had found in maintaining a high-speed link on the move - problems that some sceptics had said could kill the 3G idea before it took off - have been solved. But it is inevitable that the greatest attention will focus on the sexy, sophisticated phones that will use 3G. Our appetites whetted by the slinky concept designs from the likes of Nokia and Ericsson two years back, expectations are high.

And it is here where 3G remains disappointing. The NEC phones are attractive to look at - as compact and light as the best GSM phones around today -but that also means the colour screen can only be a little larger than the norm. And, while it's a perfectly good, sharp display, it is tiny. We were shown live still images from security cameras around the Manx Telecom HQ, but it would be difficult - maybe impossible - to recognise anyone. And, crucially, those images are still: the phones do not yet have the ability to play video, so we are still having to imagine what the most hyped feature of this new technology looks like. Manx Telecom blames the handset manufacturers for not getting round to building in video capability yet, and says moving pictures remain a key part of what 3G will offer. Indeed it will. From downloadable football highlights (not for nothing is Vodafone sponsoring Manchester United) to movie trailers to help you book cinema tickets, video will be the big difference between 3G and what has come before. Video conferencing, such a damp squib to date, could perhaps make it on 3G as well - when the technology is ready. Until it arrives, 3G content is going to be vulnerable to suggestions that this is just like Wap - only with pictures and a big bill attached. And, as a handful of people on the Isle of Man can tell you, that would be very harsh indeed.

· Neil McIntosh was one of a group of journalists flown to the Isle of Man by the Manx government's e-commerce division.