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NFC Taking Off More Slowly Than Expected

Market-watcher ABI Research has significantly scaled back its predictions for NFC's penetration into the cell-phone market, reflected in slow movement among mobile operators.
By Mary Catherine O'Connor
Apr 13, 2007In early 2006, ABI Research predicted that by 2010, more than half of all mobile phones worldwide would carry near-field communication (NFC) technology. NFC is a short-range, 13.56 MHz RFID communication system designed for such applications as electronic payments or data exchange. NFC tag and reader modules can be integrated into cell phones and other small handheld devices. But this week, in its latest analytical report of the NFC market, the consultancy forecasted that slightly more than 20 percent of the mobile handsets sold globally will be equipped with NFC by the year 2012.

This is the second time the firm has revised its NFC forecast based on its analysis of the role mobile operators are playing in the technology's adoption. Last September, it stepped down the 50 percent figure to nearly 30 percent, pushing it out to 2011. "Operators are the primary customer for handsets," explains Jonathon Collins, senior analyst at ABI, "and, therefore, the gatekeepers who will decide when NFC is integrated into the handsets they subsidize for their customers."

By offering services to consumers based on the technology, mobile operators have much to gain if—or when—NFC takes off, Collins explains, and they're increasingly optimistic about the potential for NFC to add "to their revenues and tighten their subscriber relationships." At the same time, he says, the carriers also want to see solid, trial-tested industry standards before they begin to place large orders for NFC-enabled phones from handset manufacturers.

"Aspects of the technology," he says, "particularly those related to security and application management, remain unsettled." Last summer, the NFC Forum, an industry group devoted to developing NFC technology, announced an architecture and the specifications on which it would base standards for how NFC devices will establish communication, exchange data and interoperate (see NFC Forum Announces Technology Architecture.

These standards will need to address how personally identifiable data and information linked to electronic payments will be secured and managed on NFC-enabled devices. Operators, card issuers and consumers are all concerned about security, and carriers need to feel confident that consumers will warm to the technology and access the feature on their phones.

The standards should give mobile operators confidence that NFC-enabled phones from different manufacturers will interoperate. This is important for the peer-to-peer data sharing NFC enables, and mobile operators could offer it as a subscription service. The success of NFC technology also hinges on the development of collaborative relationships between mobile operators, payment-card issuers, RFID-based contactless transportation ticketing providers (rapid transit agencies, for instance) and others.

According to the new ABI Research report, which Collins coauthored, the NFC Forum must create standards that can be deployed on phones regardless of whether a device uses the Global System for Mobile communication (GSM) or the Code Division Multiple Access (CDMA) communication scheme,. "Without a single NFC architecture for each of the major wireless interfaces—GSM and CDMA—mobile operators are left trialing different NFC implimentations on various handsets," Collins notes. "Once standard handset implementations can be resolved and trialed, the rollouts can begin."

The full ABI Research study, "Near Field Communications (NFC): Leveraging Contactless for Mobile Payments, Content and Access," is available through the ABI Research Web site, and also includes forecasts for device and chipset shipments and revenues.
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