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Your Digital Wallet

With new technology called near-field communications, you could use a cell phone to make purchases, or even download a movie trailer from a poster.

The technology inside smart cards and highway toll-taking systems is now making its way into cell phones. And, within a year or two, it could be changing how many of us get information and do business.

Near-field communications (NFC) combines two established technologies: radio frequency identification (RFID) tags, which are tiny chips with built-in radios, and wireless readers that pick up signals from the radios. Similar technology is used in electronic highway toll systems, such as Fast Lane Pass, in retail stores and their suppliers, and in U.S. passports. And it’s now being introduced into mobile phones, given their ubiquity and ability to have more features crammed inside them.

Near-field technology uses RFID tags with a range of about four centimeters, meaning a person would need to hold a cell phone quite close to a reader, in much the same way that barcode scanners work. RFID tags with certain specifications can also communicate directly with each other, so that two NFC phones could talk to each other.

In April, the regional transport authority for Frankfurt, Germany, Rhein-Main-Verkehrsverbund, said it had successfully completed a 10-month trial of NFC technology in which commuters could use their cell phones as mass-transit passes or to buy tickets directly.

The trial used Nokia 3220 cell phones that have NFC technology built in, and involved support from Nokia, Philips, and Vodafone. The Frankfurt transportation system said it would now adopt the technology, which will also be used by 14 local retailers as a form of payment.

Although this is the first commercial application for the technology in cell phones, the NFC Forum, an industry group made up of a broad range of vendors, including Philips, Sony, and Nokia, says that more than 60 trials of NFC technology are underway throughout the world. And last week the forum announced several new technical specifications for improving data exchange among cell phones from different vendors, and for making it easier to build new NFC applications for cell phones.

With NFC technology, phones could become like mobile wallets, yet with the added ability to swap addresses and share photos. People could also use the technology to download movie trailers from a movie poster, or to get detailed product information in the midst of shopping.

Cell phones that use Bluetooth or WiFi will find it even simpler to connect using NFC, says Erik Michielsen, director of RFID and ubiquitous networks at ABI Research in Oyster Bay, NY.

The introduction of specification standards means that the basic NFC technology is in place for use in cell phones, says Gerhard Romen, head of global market development at Nokia and chair of the NFC Forum’s Marketing Committee. “From the perspective of an overall technology architecture, everything is there now,” he says. Once an industry group agrees on technical standards, it usually takes from three to five years for the participants to develop versions that work well in the market, Romen says. The forum was created in March 2004. While only Nokia and Samsung currently have NFC phones on the market, a number of new ones should be introduced in 2007.

Nokia already has three phone models that come with the technology, one of them ruggedized for special uses. The company’s primary market for NFC phones right now is corporate “field forces”; for instance, security companies use them to verify that security guards are making their rounds and British trash-can inspectors use them to prove they’ve inspected a can, which has a tiny transponder that is scanned with a phone.

But of course a workable technology doesn’t always mean one that will succeed in the market. Near-field communications builds on the concept of “contactless” credit cards, which also use RFID chips. Such credit cards have been popular with both issuers and retailers, particularly in Europe, since using such a card with a personal identification number (PIN) reduces fraud and counterfeiting. In the United States, 15 million of them are in use, in places like gas stations, convenience stores, and supermarkets, according to ABI Research, which predicts that by the end of the 2006, 55,000 merchants will have installed readers available from companies like Vivotech.

The key advantage of NFC is its versatility. “We see a lot of reasons for this technology to develop,” says Michielsen. Even if customers don’t pay with cell phones, they will swap and download information. And after 2010, he expects that “service discovery” uses, such as getting product information and movie trailers, will become an everyday activity, driven by media companies.

It will help that the NFC Forum has put standards in place, says Michielsen, since they enable a global market, which, in turn, lowers development and implementation costs. He projects a spate of commercial applications for NFC phones by late-2007, and, by 2010, that half of all new cell phones, or 500 million units, will come with NFC.

It’s an optimistic scenario, but perhaps not unrealistic, given a working technology, standards, and the lowering of costs for RFID tags, from a separate industry effort to replace barcodes with them.

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