(Helsinki, Finland) Leave it to Nokia – with its intimate connections to cellular-network operators such as Orange and Vodafone – to nurture new technologies that could help traditional carriers beat back the threat from free or low-cost Internet startups such as Skype. Now, as mobile devices become increasingly powerful, the Finnish company is moving aggressively to develop new service-based mobile technologies that will further blur the line between handheld devices and PCs.

Many of Nokia’s advanced technologies are designed and tested at the Nokia Research Center in Helsinki, Finland. The center is also headquarters for the Nokia Ventures Organization, which commercializes some of the technologies that emerge from the research operation.* One recent example: Lifeblog, an online diary where users of certain Nokia phones can publish pictures, videos, and text messages.

Markku Rauhamaa is vice president of Nokia’s Local Interactions Business Line within the Nokia Ventures Organization, which works outside the big business groups in the company – mobile phones, multimedia, enterprise, and networks – to develop ideas for entirely new businesses.

Technology Review senior editor Wade Roush visited the company’s offices in Helsinki to talk with Rauhamaa about the company’s current R&D and business development activities.

TR: What startups does Nokia Ventures fund, and how will they be exploiting new wireless and cellular technologies?

RM: The Nokia Ventures Organization itself is not a venture capital organization, but for example, in the area of contactless payment, there’s a California company called Vivotech that Nokia has invested in through the Nokia Growth Partners fund.* It is enabling existing point-of-sale equipment [such as cash registers and vending machines] to be contactless. For just $100 or $50 it adds the RFID capability to the point-of-sale device. Contactless payment and ticketing also requires a trusted partner, a [payment service] that somehow gets triggered and handles the transaction when you wave your phone over the reader. That’s another interesting area for us – but I can’t go much deeper on that one right now.

Another example of an area the Nokia Ventures Organization is looking into is marketing and advertisement. The phone is a very personal device, so you cannot do marketing [on it] in the same way you would on TV. You need to be very careful that it is not intrusive. But there are a lot of interesting things happening on that side.

Then there’s “mobile loyalty.” Think about having not only the payment and ticket card in your device, but also your loyalty card for the supermarket. Globally, price reductions through loyalty schemes amount to about $100 billion – it’s a huge business.

One of the general themes is that we need to look forward, outside the device itself, to the new services that will be enabled. This industry has made mistakes in the past. Everybody knows the WAP story. [WAP, for Wireless Application Protocol, allowed carriers to deliver stripped-down text-based information to cell-phone screens. It was a success in Japan, but failed in most other countries due to a lack of standardization and specialized content. -- Editors] At that time, it was said “You’ll have the Internet in your pocket.” Well, they didn’t look widely enough. They didn’t build the solutions customers wanted. I hope we have learned based on that.

* Correction, February 27, 2006: A previous version of this article implied that the Nokia Research Center and the Nokia Growth Partners fund are divisions of the Nokia Ventures Organization. In fact, the Nokia Research Center and the Nokia Ventures Organization are separate entities located in the same building, and the Nokia Growth Partners fund is also separate.

TR: If services outside the device are important, what are the larger sectors to which Nokia Ventures is looking?

RM: There are many different directions. There’s cellular, of course, with wideband CDMA and 3G evolving faster, into what’s called “3.9G.” Then there is Wi-Fi, Wi-Max, and Unlicensed Mobile Access (UMA), which was just launched. It’s interesting how the convergence works across these technologies and how the devices and services evolve. Then there is an even more local approach, basically, touch-based phenomenon. We are working hard on the Near Field Commmunications standard (NFC). NFC is a new protocol being developed for giving an RFID reader capability in the handset. Basically, you come close to a tag and read whatever information it contains. Nokia was first on the market with that, with an announcement last Monday [February 13].

TR: Wasn’t DoCoMo, the Japanese mobile phone giant, working with Sony on a touch-based system with smart cards?

RM: That’s right. There are two standards for contactless communications: NFC and FeLiCa. In Japan, FeLiCa was the one they were counting on, and it’s not fully compatible with NFC. But Sony, Phillips, Nokia, and a few others are now counting on NFC and chipsets are coming on the market. It’s an area that enables a lot of work-force solutions – having a phone that’s an RFID reader and smart card can trigger basically any transaction. It can be “I’m doing a report,” “I’ve been here,” “I believe this,” or “I want to automatically get in contact with someone.”

Then of course there’s the contactless payment phenomenon. Special contactless cards can be used for different things, like bus and metro tickets. We have the first portable device that includes a smart card and NFC capabilities, which means this same device can host MasterCard, Visa, and bus and metro tickets. It works exactly the same as a credit card.

TR: Is that a prototype at this point?

RM: It’s much more than a prototype. We are running about 30 trials globally. The biggest one in the United States is at the Atlanta [major league] baseball stadium, where the payment and ticketing solution is used.

TR: What can people at the Atlanta stadium do or buy using their phones?

RM: They can carry their entrance ticket in their phone, and they can use the phone as a credit card as well. A signature is required in some cases, in others it’s not. The good thing is that when you need to modify the card information, you can do such things over the air. You can change the validity, you can add value. It’s a special arrangement at the moment; the full service is not yet finished. And of course we have only a few handsets out there at the moment. Our business groups will have the devices later this year.

TR: I’ve been looking forward to the day when I don’t have to carry a wallet – it sounds like we’re getting closer.

RM: We are getting closer. When we’re look at the forecast for the number of devices with these capabilities three to four years from now, it ranges from 100 million to maybe 400 million. I don’t think we believe the 400 million figure – but, still, when it’s beyond 100 million, it’s significant.

TR: You’ve mentioned delivering Voice-over-IP service to a mobile phone. Are you talking about regular cell phones?

RM: Devices that have VoIP and at the same time have a cellular capability are the biggest example of convergence going on right now, from our point of view, and that is where the interesting applications will be. All of the new enterprise phones from Nokia will exist with wireless LAN capability, so all of them can have the voice over IP capability. UMA is a specific form of that.

TR: Can you seamlessly switch from a wireless LAN, say, using UMA, to the cellular network and not lose a voice call or lose data?

RM: Yes, that’s the UMA approach. For example, on this device [a Nokia 9300 smartphone], I happen to have both GPRS and Bluetooth capability. When I move from the full coverage to the Bluetooth coverage – when I get to my desk, for example – it automatically switches and my e-mails are downloaded through that. I don’t have wireless LAN capability on this one, but the newer version has that capability. You can imagine the applications in business – e-mail, my task list, my calendar, my sales reports, my latest presentation, and anything else on my device could be updated or backed up automatically. When I get home it switches my calls automatically to voice mail, and it might download the latest music I gathered earlier from my DSL connection.

Home page image courtesy of Nokia. Nokia Head Office in Espoo, Finland