Hamish McRae: The mobile phone boom is over

The world's largest mobile phone company, Vodafone, manages to chalk up the largest-ever lossby a British, or indeed European, company - nearly £22bn. Meanwhile, the new head of the world's largest mobile phone handset manufacturer, Nokia, says it is expanding from being just a mobile phone company. Something is clearly up.

If you wanted to pick a moment to mark the end of the mobile phone boom, and the transition to something new, unknown, but with equally seismic consequences, this is as good a day as any. The mobile phone boom has broughtprofound benefits to humankind.

Yes, we bitch at its intrusiveness, the "I'm on the train" syndrome. The newest incarnation of mobile telephony, the BlackBerry, has brought the office to the beach and, of course, has been dubbed the crackberry for its addictive powers. But set against such irritations has been the way it enables people to connect to each other, and the huge economic benefits to people who could not do so before. For example, there are more than 150 million mobile phones in Africa. The world's poorest continent no longer carries the additional burden of appalling telecommunications.

But the growth of mobile phone penetration is slowing. The glory days are over. Vodafone's current misery is a result of previous excesses and, in particular, paying too much for the German telecoms group Mannesman. Its loss is entirely the result of having to write down the value of earlier acquisitions, for the company is still trading perfectly profitably.

We will, naturally, continue using our mobile phones, but in the future, growth will be much slower than in the past. Just about everyone in the developed world who wants a mobile phone already has one. Maybe we will want to use them even more, sending each other photos and the like, but there is a limit even to that. Meanwhile, the costs are being squeezed down by competition. So the boom is over in the sense that the market is mature.

Much the same point applies to handsets. Nokia's genius has been to make better phones than anyone else. It is rewarded by a global market share of 35 per cent. But while demand is growing at about 15 per cent a year, mobile telephony is becoming a replacement market. Sure, the technology is advancing all the while, but if you just want to use a phone to talk and text, an old phone works as well as a new one - arguably better. In a newspaper interview this week, the new head of Nokia, Olli-Pekka Kallasvuo, said the company would move beyond traditional mobile telephony, taking account of the convergence of the internet, IT and music.

There's the rub. Convergence. We know it will happen, is happening, but we don't know what will converge with what. There are clues, of course. The runaway success stories of the past three or four years help us there. Google has demonstrated what you can achieve by being the best search engine. Apple has rejuvenated itself on the back of the magic appeal of the iPod. Skype has made the long-awaited breakthrough in making internet telephony simple and widely available. Meanwhile, cities are wiring themselves to give wireless access in the streets - the City of London's system will go live in July - so that people can connect with whatever kit they choose.

But experience of new technologies shows that we don't know how they will be used until they are up and running. And we don't understand enough about human beings, so the experts make huge mistakes. The mobile phone companies did not think people would want to text: the system was originally an add-on designed for network engineers to communicate with each other. But they did think people would want to use the additional bandwidth provided by 3G, and bid vast amounts for the spectrum. People want to download music, but they don't seem to want to send photo-messages to each other.

So, over the next few years, we will see a tremendous amount of churn: lots of new ways will be developed of using the new technologies as forms of consumption. But even more important will be ways of using the new technologies as a method of production.

A word of explanation. With some new technologies, the product incorporates new technology, but the production method is established; with others, the product is the same, but the way it is made is new. Thus, a new hybrid car - the Toyota Prius, for example - is made on a production line, a system of manufacturing invented by Henry Ford. On the other hand, a Swatch watch looks like an old analogue mechanical one and does the same job, but its quartz innards are completely different.

Now apply this to mobile communications. There will be lots of new products and services that we, as consumers, will choose to buy, or not. That is the obvious bit. Much less apparent will be the way the next phase of the communications revolution changes the way goods and services are produced.

An example: a child is taken ill in the night. You ring the GP, get some centralised medical service, try to explain what is wrong, and then have to make a judgement whether to race to hospital or not. It is frightening, even dangerous, and very inefficient because when in doubt it is safer to take the child in.

But suppose you and the doctor on duty had a high-quality video link by the child's bed, and the doctor had access to his or her medical records. The doctor could see the patient, monitor temperature and other medical signs, and if it were necessary to go to hospital, the casualty staff would know exactly what they had to deal with. Result: a much better -and safer - service, but also probably a cheaper one.

That is an example that we, as ordinary individuals, could see. Most new applications of the new, converged mobile communications we won't see. Nor will we need to. All we care about is having a more reliable and secure pension, or a simpler way of doing our tax. One clear advantage for more and more of us will being able to work not just from home as well as the office, but from a variety of locations. That will also bring greater efficiencies. Indeed, the more flexible communications become, the easier it will be to figure out ways of using a necessarily more flexible workforce of older workers and part timers.

And if it is tough for companies such as Vodafone and Nokia to adapt to the next stage of the mobile revolution, then so be it. Both have made an enormous contribution to the first stage, and prospered, on the whole, as a result. But somewhere out there will be the champions of the next mobile boom - we just can't know where they are just yet.