Should Have Known Mobile Payment Prospects Were Too Good to Be True

Yeah, it's started. The bickering and squabbling among the players.  Now I'm on a roller coaster of thoughts about how soon we'll start to see mobile payments using Near Field Communications (NFC) on our cellphones.

Cool New NFC Logo

I was quite pessimistic when first I wrote about mobile wallet in November 2010. I thought all the players who would be involved would spend so much time bickering over technology. And there is always the problem of figuring out who gets paid.

Then I was just ecstatic when the joint venture Isis was announced just a few weeks later. "At last," I thought, "maybe the key players will actually learn how to agree on things and get along."

Nope.

My mistake. They're fighting already. Before things get off the ground.

In a Wall Street Journal article called RIM, Carriers Fight Over Digital Wallet, by Phred Dvorak and Stuart Weinberg, say the battle is now coming down to, "who owns the customer?"

The dispute centers on where key data related to mobile payments will reside on the next generation of smartphones, slated to come out later this year. Now, such information is stored in the magnetic strip on a credit or debit card. RIM [makers of the BlackBerry] and other handset makers are poised to make phones that will store this data, known in industry parlance as "credentials," in the devices themselves. In a transaction, the customer would wave the phone near a special electronic reader at a store's checkout.

 But RIM and carriers like Rogers Communications Inc. in Canada, and AT&T Inc. and T-Mobile USA in the U.S., disagree over exactly where on the phone the credentials should reside—and thus who will control the customers, revenue and applications that grow out of mobile payments.

Great.

What's the big problem?
Apparently, if your credentials/password/bank account info is stored in one part of the phone, the handset vendor "owns" you. If that's all stored somewhere else, the carrier owns you. And, I'm sure, it won't be long before your bank thinks it should own you, your credit card company wants to own you, Starbucks wants to own you and iTunes wants to be in there as well.

What does it mean?
These squabbles will all lead to more delays (or, at worst, total failure) for mobile wallet and mobile payments using NFC. Already, the lack of standards has caused Appple to wave off its first attempt at NFC, which was expected to be in the iPhone 5.

Is there any hope?
Of course there's still hope. There is no question that NFC payments work; systems have been in place for years in Japan. But the key is that Japan's system was built with cooperation among all the players. All the mobile operators in Japan have adopted the same technology and all their phones are compatible. But it works. And it could work here in the US... providing, of course, everybody finally agrees how it's going to be done.

The Three Revolutions in Cell Phone Design

There has been a lot said about "disruptive technologies" and how important they are. but in the 25+ years since we've had cellphones, there have been only three revolutions, three changes that have actually changed the way we think about the design of mobile phones.

Stuff car phone components in a bag and you have a hand-portable cellphone!

Where We Started: The Bag Phone
Cell phones were car phones. There was a handset inside the car with a transmitter/receiver mounted in the trunk. Your car's electrical system supplied 12 volts to run the thing. Was that good enough? For the first couple years it was, until the need for portability arose and all the components were stuffed into a bag... handset, transceiver, antenna and a 12-volt lead-acid battery. It was big and heavy, but you could carry it anywhere. Plus, it operated at 3 Watts, five times the power of portable handsets. Those bag phones would operate even in very low signal areas (and, face it, in 1991, there were a LOT of low signal areas).

Motorola DynaTAC.

First Revolution: The Brick
Starting with the venerable Motorola DynaTAC, (was that a great phone, or what?) there were generation after generation of "brick" phones, that gradually became smaller until they became what we now describe as "candy bar" phones. They got smaller, added features, lost the external antenna and got made over with fancy color screens. But it was still the same basic design (reading from top to bottom):
Earpiece
Screen
Buttons
Mouthpiece

The Second Revolution: The Clamshell Phone

Motorola StarTAC, 1996

In 1996, the Motorola StarTAC turned the cellular world upside down. Designers at Motorola split the basic candy bar phone in half, putting the earpiece above the hinge and the screen, keyboard and mouthpiece on the other half. If you don't remember, the StarTAC was an absolute sensation. Cellphones were still the province of the wealthy and connected at that time, and crazed stockbrokers were paying two and three times the suggested price to own one of these treasured devices.

Yes, they were mostly analog models in the US and, yes, you would have to buy several batteries to get through a whole day of usage. But the clamshell put Motorola at the top of the industrial design market for cellphones. The ultimate expression of that was the beloved - and later reviled - Motorola RAZR.

The Third Revolution: iPhone

Apple iPhone, 2007

If you missed the excitement the StarTAC generated, you got to witness it with the iPhone in 2007. Aside from all the hyperventilating about the user interface, iPhone has created an even greater revolution in the deployment of applications to mobile phones, forever altering the relationship between the cellular customer and the cellular operator.

The longer-term effects of the iPhone have been to breed another classification of device: the tablet computer, (re)introduced as the iPad, which is little more than a big-screen iPhone.



Looking Back From 2011
Cellular networks were launched in 1983 and started to come into their own in the early 1990s with the DynaTAC and other portable devices.

It was nearly 10 years before the StarTAC revolutionized handset design and another 10 years before the announcement of the iPhone. In the meantime, cellular networks matured, went through three generations themselves. If you're extrapolating the changes in phones, look for things to change significantly... in 2017

Netheads vs. Bellheads: Disrespecting "the cloud"

I continue to believe there's a big difference between Netheads and Bellheads, but there's something I heard this morning that really points out a huge disconnect between those two worlds.

What started me thinking was a sponsor message this morning on National Public Radio that promised improvements in business by taking advantage of "the cloud." 

Mmmmm... what a lovely image. Light drifting shapes that appear and vanish all by themselves,  with no intervention or control by those of us who live on the Earth. Who made the clouds? Nature. Who controls the clouds? Thermal currents, winds, humidity, terrain. Some might even attribute clouds to the benevolent Hand of God.  Farmers and their crops depend on clouds. The utility businesses of our cities and towns rely on clouds to supply drinking water and light. 

Real clouds

But listen more carefully to the use of "the cloud" when it comes to computing.  Folks, the computing cloud is anything but light drifting shapes beyond the control of those of us on Earth.  In fact the computing cloud was built and continues to be maintained by some of the biggest and most important companies in the world. Each of those links between servers, between your computer or smartphone and "the cloud" were built at great expense by telecommunication companies, some of whom rose and fell during the dotcom boom of the late 1990s.

What does that mean in this world? It points out the difference between those who use the network (the Netheads) and those who built the network... the Bellheads. Google, Apple, and others are building by attaching devices and services to either end of The Cloud but have little responsibility for the creation and maintenance of The Cloud.

Google and Apple can't live and can't thrive without The Cloud. Will they someday compete with and even replace the companies that provide The Cloud? I have my doubts.  I think the Nethead business case falls apart when the realities of the enormous capital and operating costs (as well as the pressures of providing world-class quality-of-service) is factored in. 

 

Two Worlds: Netheads and Bellheads creating our future.

In a previous post, I alluded to what I consider to be two different worlds in the mobile payments space. In reality, those two worlds are facing off in almost everything mobile.  I call people from those two worlds "Bellheads" and "Netheads."

Bellheads, as you might guess, are people who work for the phone companies. Call them what you like... telcos, telecom carriers, incumbents. Their business has always been to connect two phones and make one of them ring. And, of course, keep meticulous records so they can charge for every minute of use. All of the US telephone companies and cellular operators are run by Bellheads

Netheads, on the other hand, come from Silicon Valley and are wrap their businesses around computers and communication via the Internet. You know the Netheads by name: Apple, Google, Microsoft, Dell, Yahoo!

Bellheads are network builders. Netheads are network users.

Bellheads want the meter running for everything. Netheads prefer unlimited bandwidth.

Even though they'd been eying each other warily for years, the real collision came in 2007 with the release of the iPhone when the Netheads showed the Bellheads their best. And, because of their success, the Netheads got to dictate some of their own terms.

However, despite the fantastic hardware and all the App Store applications, there's still one place where the Bellheads have the upper hand: Capitol Hill.  Their influence is strong, they are savvy and they know how to make legislation and FCC rulings go the right way.