Mobile operator O2 has decided to put its weight behind GSM and 3G mobile technology instead of Wi-Fi in its next generation of phones.

The operator rejected Wi-Fi hotzones and poured cold water on WiMax at a London summit yesterday, which it convened to boast about its current high growth rates of O2.

Dave Williams, O2"We've played with UMA and SIP, but they would require new phones," said Dave Williams, chief technology officer of the company, which became part or Telefonica earlier this year. Instead, he showed an Ericsson-built GSM indoor base-station which would use the customer's DSL to connect to the mobile network, and might be used in a convergence play which O2 plans to launch next year.

The box does not need UMA or SIP, said Williams, because it includes a reverse-engineered Sony Ericsson phone, that connects to the phone network over the Internet. The box has a slot to include a SIM card. The box could be shipped to customers as the basis of a triple-play broadband service rolled out by O2's recently acquired broadband division, Be. "These boxes already cost less than €100," said Williams.

This won't happen until next year, because O2 wants to solidify Be first. "Be broadband is currently a customer retention tool," said Williams. Unlike providers such as TalkTalk, O2 plans to deliver service only to unbundled exchanges, where it does not have to resell BT services, and won't launch until it can reach 50 percent of the UK population from such exchanges.

"We've watched the market for free broadband, and customers realise that there is a scam in it," said Matthew Key, the chief executive of O2 UK. Other O2 ideas include My Bluebook, a scheme to back up sentimental photos and texts to an O2 server.

O2's 15 percent revenue growth and ability to acquire new contracts allowed Key to make a complacent presentation about O2's "customer insight" in the UK. O2 had launched lower cost international roaming, he boasted - though this only applies in Spain, and is only just ahead of European regulation to limit mobile operators' profiteering.

As well as UMA, which has been suggested as a link between femtocells and the phone system, Williams was dismissive of other technologies which challenge the mobile operator's plans for 3G and beyond, including WiMax ("we're running two trials, but it's aimed at fixed networks") and municipal mesh networks ("HSDPA gives better performance already").

He also promised an end to operators' endless handset upgrades: "The hardware war will stop," he said. When phones have five megapixel cameras and high quality camera optics, then the phone is a matter of software which can be downloaded for upgrades.

However, upgrading the network is not such a simple matter. O2 wants to run 3G UMTS services on the 90MHz band used by today's phones. This would run counter to its current spectrum licence but a bigger problem would be ensuring that enough users had 900MHz UMTS chips in their phones in advance of a switchover, said Williams.