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They were meant to be like the Hitchhiker’s Guide to the Galaxy, only on a smaller scale. And without the hitching. Four or five years ago, the mobile phone industry was buzzing with hype about services that would work as a travel guide on a phone. They show your position on a map, suggest local restaurants and bars, and perhaps even send you a coupon for money off a burger as you walked past a fast food restaurant. Like many mobile services, the growth of these services has been disappointing.

In Japan, many different location-based services are widespread. According to Tokyo consultancy Eurotechnology Japan, some 20 per cent of handsets have a built-in receiver for the GPS satellite positioning system, allowing users to calculate their location to within a few metres. Independent service providers use a phone’s location signal to tailor a range of services to a person’s location.

In Europe, however, the market is far less advanced. Apart from some services that work out approximately where a user is from the location of their nearest base station, there are few location based services available.

This could all be about to change. German consumer electronics company Medion helped to kick-start Europe’s GPS navigation market when it developed a cheap all-in-one navigation device and sold it through the Aldi supermarket chain.

“It really flew off the shelves,” says Chris Jones, senior analyst at research company Canalys. “Up until then the solutions had been expensive and difficult to get to work, and there hadn’t been much of a market.”

Canalys estimates that 978,000 devices sold in the first quarter of 2005, an impressive growth spurt compared to the 2.5m units shipped in the whole of 2004. These devices are popular with drivers, costing as little as €300 – a considerable saving over the €1,000 or more it costs for a car’s built-in navigation system.

By the standards of the mobile phone market these numbers are small, and the navigation industry is keen to start building GPS into mobile phones. Several different companies sell smart phone systems with a separate GPS receiver linked in via a Bluetooth wireless connection, but they do not sell in large numbers.

This year the phones with built-in GPS are expected to appear on the European market. With their small screens, mobile phones are not the ideal device for navigation, but for many users the convenience of not having to carry a separate device is an attraction.

For all these devices, the main use is the simple process of finding the way from one place to another, usually in a car. The industry is now looking beyond this, to target pedestrians and international travellers with up-to-date information about the places they visit.

In particular, the mobile networks are keen to find a way to use GPS-enabled devices as a way to start pushing more traffic over their expensively built and under-used data networks. Travel guides will play an important role in this, as network operators cannot expect to make much money from simply downloading maps.

Detailed road maps of the whole of western Europe take up just 730 megabytes, which can be downloaded onto a PC and copied onto a single memory card smaller than a postage stamp. This can be loaded into a phone, saving the need to download any map data on a mobile phone network.

Some companies, such as Wayfinder Systems, are still developing systems based on downloading maps over the air, and it has signed up some big operators, including Spain’s Telefónica.

Others, including mobile phone network Orange, are looking elsewhere. As Gavin Shurmer, business development manager, says: “Downloading maps is not something that we are necessarily allergic to. But there is high possibility for dynamic downloaded overlays.”

These new overlaid services, such as travel guides, will need to be updated on a much more regular basis – giving customers a much better incentive to download information as they go. Companies are already starting to target this market. In France, navigation software provider Navigon launched a co-branded device with the Zurban city guide.

Michelin, publisher of touring guides for drivers, has also entered the navigation market, with electronic versions of its paper travel guides for phones and hand-held computers.

US-based Wcities provides travel guides to 300 cities, targeted largely at pedestrians. Its services can be accessed on demand from phones or downloaded onto memory cards.

The latter approach is increasingly popular, says Fraser Campbell, vice-president of Wcities. “We have over 30,000 people who have requested the downloadable guide though we have done very little in terms of marketing.”

However, the easier it becomes to download information onto memory cards, the less traffic will be generated for the mobile networks.

Location-based advertising is one possibility for generating revenue for networks and content providers alike. Navigation software company ALK Technologies has been in talks with a leading UK pub chain about paying for all its locations to be listed on the maps for its Co-Pilot navigation service.

Co-Pilot has also considered using a coupon-based system to entice travellers with special offers as they walk past a bar or restaurant.

Mr Campbell says: “It would be too much work to approach all the people individually. I think something on the model of Google’s local search would work better.”

The range of possible services and revenue streams is vast. The success of the pioneers in this market suggests that it has huge potential. But the future development of location-based services depends on how the mobile network operators play their hand.

Orange’s Mr Shurmer says: “There are lots of companies providing exciting solutions in this area. They’re looking to us and we’re looking at them to see if there is anything we can do together. That’s the conversation we’re having now.”

If that discussion works out well, technology lovers will soon have a wealth of alternatives to the paper road atlas and dog-eared copy of the Lonely Planet.

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