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Telcos' Dual Vision for RFID

Providers hit with declining revenues from voice service are taking action on two fronts: adopting RFID asset tracking to cut costs and diversifying their business by providing RFID services to existing customers.
By Elizabeth Wasserman
Dec 01, 2007—The telecommunications industry is positioning itself as both a customer and purveyor of radio frequency identification services. Some traditional providers, such as AT& T, are adopting RFID in their own businesses to reduce costs by tracking expensive equipment. Others, including British Telecom and Telekom Austria, are trying to boost falling revenues by providing RFID expertise and services to their existing telecommunications business customers. Mobile phone manufacturers, meanwhile, are convinced that RFID-enabled handsets will be embraced by consumers to make payments at stores, buy tickets on mass transit and conduct other financial services.

Telecommunications service providers have been facing pressure on their traditional revenue base—voice service—from wireless and Internet-based telephony. While voice-based revenues for the telecommunications industry top $1 trillion annually worldwide, mobile subscribers are growing and outnumber fixed-line subscribers by three to one, according to the Organization for Economic Co-operation and Development (OECD). The changing telecommunications business model has forced traditional landline service providers worldwide to consolidate, merge with mobile providers, and branch out into providing data networking and other business services. Now providers are looking at RFID technology to further cut costs and increase revenues.

Providers are looking within their own businesses for areas in which RFID asset tracking can help cut shrinkage—the loss, theft or misplacement of expensive equipment.
Many of the RFID applications being used by various industries to improve manufacturing or supply-chain efficiencies aren't applicable in the telecommunications industry's service-oriented business model. But providers have recently started exploring ways to realize benefits through tracking the assets and parts used on repair vehicles and in telecommunications networks.

"Telecom doesn't have a lot of that stuff to track by the pallet," says Nick Jones, vice president and distinguished analyst at Gartner, the technology research firm. "They're more worried about getting a bill out every month for 15 million subscribers. They do own a lot of infrastructure, however, and I wouldn't be surprised if some of the spare parts in the network would lend themselves to RFID."

Telecommunications service providers now maintain a variety of different networks—voice, cellular, video and data—that serve the public. These companies also provide services to businesses including setting up and maintaining internal voice, wireless and data communications networks. The telcos that are venturing into the RFID business—providing companies with the tools to use RFID to track inventory, assets or goods—believe it's a natural extension of their existing communications services. That's because the data gathered from RFID readings will be transported over a company's internal networks to a database, where managers can analyze the results.

"The telecom industry is desperate for new sources of revenue," Jones says. "They know that there is a declining market for voice." It makes sense for them to offer RFID services, he adds, because they can be positioned as a natural outgrowth of the new telecom/data business.
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