September 14, 2004

Wireless Gets Up Close

Continued from page 1

By Eric S. Brown

An NFC chip can also act as a smart card, as long as it is integrated with a security controller chip equipped with encryption. Visa, the third major partner with Sony and Philips in the NFC Forum that is pushing the technology, has sold hundreds of millions of contactless smart cards, primarily in Asia, where they are used mostly for mass transit fare collection. The more robust NFC is compatible with this similar RFID technology.

If people can move through a turnstile faster and more securely by holding up a contactless card instead of swiping a card through a reader, it should be even more convenient to hold up a cell phone. Smart cards are often too thick to comfortably fit more than one in a wallet, and users need to stop to fish them out of the wallet and slide them back in again. Initial applications of the NFC smart cards will be in point-of-purchase locations where check-out speed is at a premium, such as ticketing, supermarkets and video stores.

Philips is especially keen on selling NFC as a tool for public interactive advertising. Shahab describes a scenario in which pedestrians walking through an airport or subway would stop and glide their phones close to a billboard embedded with an NFC chip. Doing so might download a song, ring-tone, game, ticket, or coupon using either NFC or a faster wireless technology like Bluetooth or Wi-Fi. Alternatively, they could download a URL that the cell phone could automatically connect to in a Web session. Philips is working with content providers such as Vivendi Universal to develop similar displays.

Of course, numerous proposals for such public interactive marketing schemes have been bandied about in recent years, with very little progress. They all confront obstacles that are likely to limit their impact. The technology needs to work simply, quickly, and reliably, and the displays need to be sufficiently numerousand the offers sufficiently irresistibleto convince busy pedestrians to stop and interact. NFC faces an additional obstacle: Although a 10-centimeter range is an advantage for a smart card, it could pose practical and psychological barriers for interactive marketing in a crowded commuter setting. (Excuse me, maam, while I caress the billboard with my cell phone.)

Once the RFID revolution gets rolling in shipping and retail (and some project that could take over a decade), economies of scales should drive down the cost of NFC chips from their present level of a few dollars to about 20 cents (minus the encryption chip). At that price, it should be affordable to embed chips in magazines and other interactive venues. NFC boosters also list intriguing applications such as wireless mice, door keys, and patient ID tags containing medical records. Here, however, NFC is competing with numerous other wireless technologiesfrom Bluetooth and ZigBee on the low end to ultrawideband and Wi-Fi on the high end. Although those technologies tend to be more expensive than NFC, they are also faster and longer-range. The idea of using NFC as a universal set-up scheme for other devices is compelling, yet NFC suffers from the inconvenience of always having to bring devices close together. Finally, with TV powers like Sony and Philips pushing it, NFC could be built into set-top boxes and PCs and play a role in authenticating interactive TV or online purchasesespecially if it becomes tightly integrated with an encryption chip. Yet here, NFC faces even more competition.

NFCs initial success, then, will likely depend on the speed with which electronic payment companiesand here one would look first to NFC Forum partner Visaactively involve vendors in adding NFC support to smart-card ticketing schemes. Gradually, NFC could then follow contactless smart cards into more universal retail transactions. To help entice consumers, the handset vendors may spark interest in using NFC to display digital camera images on TVs or swap contact information. With these nonmonetary tasks, success may hinge upon the lack of same for its closest competitor, Bluetootha technology that received a jolt in late August when original developer Ericcson announced it was shutting down its Bluetooth division.

If a few more handset vendors chime in, its not difficult to foresee NFC emerging as the foundation for the cell phones next starring role as a universal smart card. Before the smart card smart phone becomes a reality, there will be many more plays and players to be heard fromMasterCard, Motorola, Microsoft, and Matsushita, just to start with the M's. Yet if NFC follows through on its claims for simplicity and affordability, it could very well lie at the core of a development that will truly make the cell phone indispensable.