There are £22.5 billion reasons why mobile phone companies want you to be excited about third generation technology. That was the figure coughed up in the UK alone by Vodafone, Orange, O2, T-Mobile and new entrant 3 at the high peak of irrational exuberance in April 2000.

Appropriately enough, it has taken three long years to get 3G phones into the shops. The promise is compelling enough - the ability to transfer data at speeds 15 to 30 times greater than those possible with an existing mobile. In the jargon, the bandwidth will increase from 9 kilobytes per second to at least 144, and as much as 384 kbps.

This quantum leap opens up an array of services and functions that are impossible or too slow on existing phones. Mobile video conferencing is the most obvious application, and there are clear business applications for this in certain industries that benefit from 'face-time'.

The question is, in these parsimonious times where every polystyrene cup needs to be logged, can a huge investment in 3G be justified across a business?

The best way to think of the technology is like an 'always-on' broadband network to your hand. For information-intensive industries that require a combination of mobility within a city and access to large data files, 3G will be heaven sent. For sales teams, emergency services, transport logistics, pensions salesmen and accountants, the benefits are clear.

The data speeds available for third generation technology can enable a genuine separation of worker from office. As an integral part of a change in office culture, 3G could help businesses save money by greatly reducing office space requirements.

So for employees, 3G enables more convenient working and full access to databases and spreadsheets. It is the difference between using the pared-down mobile versions of Excel and using the full software on the move. Employees could benefit from a genuine flexibility in working arrangements. In many office environments it will liberate workers from their desks.

Likewise, the videophone function can potentially save money on travelling costs and time. But both these business benefits are difficult to quantify and require a more general shift in working practices to realise.

Outside of information-intensive mobile industries, the benefits depend on the cost of the service. If 3's launch tariffs are a guide, then businesses should expect to pay for their privileged access to bandwidth (though it is rumoured handset prices are to fall because of poor sales). Calls to existing networks start at 10p per minute, video calls will be 50p per minute, but monthly line rental is free. Packages bundled with 1,000 free voice minutes and 100 minutes of video calls will cost £60 per month. The networks expect and need an average monthly bill of at least £50 per month.

The Work Foundation's iSociety think-tank says that this price is too high and such a 'misunderstanding of British attitudes to phone use threatens to delay the uptake of third generation mobile technology, or make 3G attractive to only a small number of consumers'.

Its report, MobileUK: Mobile Phones and Everyday Life, argues that high phone charges remain the overwhelming concern of mobile users. 3G phones - whose running costs for consumers could reach more than £600 a year - are too expensive to attract most Britons. The average mobile phone user currently spends well under half that sum. The Work Foundation's Max Nathan said: 'There is a myth that talk is cheap. In fact, for most people, talk remains an expensive worry that needs to be kept under control. Our research suggests that the mobile industry must remember how important cost is to most people who buy and use mobile phones. The industry is aware of this, but it doesn't change the fact that until 3G becomes better value most consumers will find it an expensive worry too far.'

Cost is of particular relevance because of the emergence of an array of competing technologies. At the time of the 3G licence auction, its promise of science fiction-style picture and video communication was a revolution. The subsequent release of intermediate technologies, or '2.5G', has made 3G more of an incremental evolution. Picture messaging and mid-speed internet access is available with GPRS technology.

The waters have been further muddied by Japanese and US networks branding as 3G technologies that are really only 2.5G. So you can get multimedia messaging, but it takes a bit of time. 3G should make these functions seamless and fast to use.

So far, however, 3G is a technology still in its infancy. Most phones are bulky, partly due to the fact that they are effectively two phones in one. They have to be, because 3G networks have poor coverage outside urban areas. The phones actually need to be switched off and rebooted as standard (GSM) phones, with virtually no data services. The rollout of a nationwide 'footprint' will be costly and slow because the network requires many more masts than the existing network.

Then there are international problems over competing 3G standards. A UK phone will work throughout Europe, but as yet will not function in the US or Asia. The fantastic array of dual-screened, stereo 3G phones sold in Japan will not work in Britain yet. But work is under way to merge the standards.

'Third generation is a blanket term that covers several different technical standards. The European standard is called UMTS or wideband (CDMA). The other flavour in the US and Korea is CDMA2000. And then there is a separate Japanese version,' says Jeremy Green, wireless analyst at Ovum, a technology consultancy.

In the US, 3G has been packaged as a business tool where contracts are sold with PC datacards and unlimited time tariffs. So far in Britain, at least, tariffs, marketing and the functions of 3's service seem more geared to the entertainment market.

And then there is Wi-Fi, the nightmare technology which has cast a long shadow over 3G. Wi-Fi offers higher data speeds, but at fixed hotspots such as train stations, airports and increasingly, coffee bars. For workers that are not constantly on the move, Wi-Fi offers a reasonable alternative for out-of-office access to corporate networks.

But 3G will also allow you to walk and drive around while maintaining a high-speed connection. 3G technology is being used extensively in cars. 'Ultimately 3G is more workhorse than racehorse. It's a technology which increases the capacity of operators to do things which are already possible with other technologies,' says Green.

Third generation will enable you to do what you already do, but a lot more quickly. It will also open up a new world of new technologies such as video calls. At the moment, such functions are not essential business productivity tools.

But then again, a decade ago most people thought the basic mobile was only for City slickers. Now nine in 10 of us own one. It will take a little time before 3G's limits are really tested.