PWC predicts that 2.5G mobile technology will continue to define the direction of the mobile market while 3G remains only "a long term view".
Eric Berg, editor in chief of the 12th annual Technology Report said 2.5G would be "where the big news will come from for the next 2-3 years".
"There will have to be a slight increase in tariffs to support the new 2.5G services, but this will be significantly less than the move from 2.5G to 3G services," Berg said.
The detailed, 1000-page report, covers 2001 to 2003 and includes interviews with Alan Harper, strategy director for Vodaphone, Dr Keijo Tachikawa, president and CEO of NTT DoCoMo, and senior representatives of Ericsson, Siebel, and Openwave.
PWC predicts that by 2002 more users will have access to the Internet via WAP-capable devices than wired devices. Even though adoption will be high, Berg said; "There will be no single killer application, but instead a collection of well-executed applications created for 2.5G, that will drive demand."
Berg believes the arrival of 2.5G services such as GPRS will solve many of the traditional problems associated with WAP, a view echoed by Vodaphone's Alan Harper. "I think WAP was over-hyped. It has as done a lot of damage to the industry [and] a lot of damage to user confidence," Harper said.
Harper believes the poor design of early terminals and application, combined with expensive by-the-minute billing, disenchanted a lot of users very quickly.
However, he maintains that WAP with always-on GPRS can be effective.
The PWC report claims messaging, entertainment and location-based services will be the key driving forces behind adoption of new 2.5G services. Paul Rees, an analyst with PWC Global Telecoms predicted that the business model used by NTT DoCoMo's I-mode service in Japan would be a template for many European operators.
I-mode charges between 10-30p for a range of services such as checking bank balances, e-mail access, online games and telephone directory searches.
"NTT have successfully used a low-cost service to buy a large customer base," said Rees, but for him a key question remains: "Do they make any money from their I-mode service?" PWC said the figures were hard to ascertain and many analysts suggest not.
The PWC report underlines the need for European carriers to demonstrate how they will generate revenue to pay for 3G licences and the large capital expenditure required for installing infrastructure and subsidising handsets.
With 3G a potentially crippling burden, Rees said, "To get to 2.5G is far more attainable for the telecom sector and we believe that we will see consolidation to just five major carriers in Europe over the next 3 years."