Hold the Phone! NFC Isn't Just About Mobile Payments

The buzz about mobile payments is becoming overwhelming these days.

• Apple is going to have NFC in the next iPhone
• Apple ISN'T going to have NFC in the next iPhone
• Everybody wants mobile payments
• Nobody wants mobile payments
• RIM wants to own the customer
• Why aren't NFC mobile payments here yet?

Despite the fact that I'm a big fan of Near Field Communication (NFC) being used for mobile payments, I think it's important not to lose sight of the fact that it can do so many more things. And those other functions are going to become critical to the well-being of the NFC ecosystem.

Here's why:

1. In the US, the battle has broken out among all the players who make up the mobile payment ecosystem, just as I predicted last year (and in my first Mobile Wallet report from 2006). This could delay or totally derail the NFC payment world as these giants battle over the three- to five-cent fees most mobile payment transactions will generate.
2. Handset vendors, point-of-sale terminal makers, application developers and merchants will be forced to wait-and-see which technology will ultimately win out. While they're waiting, they're not building compatible NFC devices or apps.
3. HOWEVER, if there is some other reason to use NFC -- some reason other than mobile payments -- you can get a head start on making handsets, applications, and building  a profitable ecosystem.

So what sort of things could you do with an NFC-equipped smartphone?

• Ticketing for public transportation
• Movie and other performance tickets
• Point-of-sale information (imagine if your product's mobile entire web site could pop up on a buyer's phone with a single swipe)
• Location-based services such as search and navigation
• Loyalty cards (such as your supermarket discount card)
• Coupons
• Membership credentials (gym membership, library card, even checking in at the doctor's office)
• Personal information transfer (swap business cards by bumping phones)

It's time to focus on non-payment NFC applications and devices

It's time to get away from the focus on mobile payments and start thinking about ways to make NFC useful for everything else. That way the warring banks, mobile operators and handset makers will have to follow and we won't have to rely on them to lead in that direction.

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

My rules for thinking about technology

I spent more than a decade working as an industry analyst covering telcommunications, wired and wireless.  I was part of the emergence of cellular systems, mobile internet (which we called "wireless data"), and witnessed the rise and fall of the competitive local exchange carriers during the ill-fated dotcom boom.

During those years, I developed ten rules for people who were doing my job and had the chance to witness first hand the benefits of following those rules and the problems caused by ignoring them.

Here are Chamberlain's Rules for Assessing Technology:

1. Ignore either/or beliefs about technology (e.g., Remember "WiMAX thrives therefore 3G dies?") 
2. Reality-check your assumptions by looking around you. Would YOU adopt the technology that you are expecting millions of people to use?  Would your friends?  Your Mom?
3. It is dangerous to drink Kool-Aid when technology vendors are serving. 
4. Incumbents, especially highly regulated ones, are extraordinarily adept at protecting themselves from competition.
5. “Success” for a new business or technology does not necessarily require mass consumer adoption or the creation of a publicly traded multinational corporation.
6. Remember the better mousetrap: The world, not the inventor, beats the path to the door. There are very few true technology revolutions. 
7. “Cheaper” or “free” is not a business plan, let alone a recipe for world domination. 
8. If the most compelling argument supporting a new technology includes the words “bits per second,” it isn’t very compelling.

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. 

 

Ireland Axes Mobile TV Plans

An article by the GSM Association published January 10, 2011 indicates the Irish regulator is withdrawing its plans to offer mobile broadcast. The article, quoted in its entirety below, says:

ComReg, the Irish telecoms watchdog, said it will “not be proceeding further” with a plan to offer a mobile broadcast licence covering five urban areas of the country, stating that following a consultation period, “it became apparent to ComReg that use of the identified spectrum to provide a Mobile TV service in Ireland was not the subject of particularly strong interest to potential operators, and interest in the proposed procedure to grant the authorisation diminished.” After seeing further information on interest from stakeholders, it received just one response, from Vodafone Ireland, which agreed with the decision not to go ahead with the plan. The regulator says that it will “keep under review the potential for the identification of spectrum which would enable the award of dedicated licences for mobile TV,” and that future, technology-neutral awards of UHF spectrum could be used for mobile broadcast services.

The decision further highlights the lack of success for mobile broadcast services on an international basis, having once been seen as a potential “big thing” for the industry. The most high-profile failure was Qualcomm’s MediaFLO venture, which is to be closed imminently having failed to become a viable service. While there have been a number of pilot and commercial mobile broadcast launches globally, these have not led to significant subscriber interest, and in South Korea, which has been something of a market leader, ecosystem participants have struggled to monetise services. According to a Juniper Research study, the number of mobile broadcast subscribers will not reach 10 million globally “until 2013 at the earliest,” at which point more than 180 million subscribers will be accessing multimedia services via 3G, 4G and Wi-Fi networks. Trials are also underway of mobile broadcast technology which is more closely related to mobile standards.

DVB-H cellphone

It's certainly not the only place that this business model has struggled.  Operators have shut down operations in Switzerland and returned spectrum in France while mobile TV operations in Hungary and Germany are at a standstill

What's significant about this? The "operator" mentioned in the GSMA article is not a broadcaster but cellphone company Vodafone Ireland, which responded with a bored, "whatever" when told they might not be able to provide mobile television service.  This spectrum was intended to be broadcast to cellphones using the same business model attempted by MediaFLO in the US.

Are they ever going to get it right? Maybe. It's worth noting that ComReg is considering "technology neutral awards of UHF spectrum." In other words, perhaps it's not going to be dedicated to the cellphone-centric DVB-H service. DVB-H is intended to be offered on a subscription basis by cellphone operators, a business model which, the article points out correctly, has "... struggled to monetise services."

It points up what I've been saying all along... the local broadcasters are in the best position to offer TV, mobile or fixed and the cellphone-based subscription model will continue to struggle if not die off altogether.

Google Voice a Threat to Mobile Operators. We Mean it This Time.

How many times have we heard this? “A new technology that is starting to gain acceptance signals the death knell of the incumbent telecommunication operators.” Let’s see. What was that technology again?

Wi-Fi.

Skype.

Vonage.

WiMAX.

And on and on and on. Now, in the article CNN Money by David Goldman, Google: Your Next Phone Carrier  breathlessly predicts Google will become a mobile operator by using its voice over IP application. Based on what evidence? The article cites the fact that Google might be buying dark fiber, might become an ISP and once bid on some wireless spectrum. But the key information is here:

“Google already allows people to bypass their mobile carrier's service. Google Voice lets customers send free text messages, and the new version of Android ("Gingerbread") supports VoIP Internet calling, allowing users to make calls over over Wi-Fi networks.”

Wow! It’s wireless Skype all over again, which has had exactly zero effect on the mobile operators. And hasn’t really cut the legs out from under the wireline companies, either.  And, really, all this talk ignores some of the most important facts out there: 

• Wi-Fi isn’t a wide area network. Isn’t now. Won't ever be. Tried a couple of times and crashed (remember municipal wi-fi networks?”). Even Google’s own experiments in San Francisco have tanked.
• If you’re going to have mobile access, you will have to use a mobile network. 4G doesn’t yet have enough footprint and will end up being controlled by the mobile operators anyway. 
• It’s not easy to build a mobile network. The vaunted Verizon Wireless has achieved its current network coverage after more than 20 years of buildout. AT&T has also had 20 years and Sprint 15. People are still complaining about coverage.

A couple of scenarios:

“I’m going to replace my AT&T/Verizon Wireless/Sprint/T-Mobile with the Google network.” Assuming a deployment twice as fast as those companies were able to accomplish, it would be 2021 before there would be similar coverage. And, as rich as Google is, it still doesn’t have the financial resources of the telcos. Come back in 10 years. Oh, wait. It’ll be at least two years before they can complete the paperwork with the FCC and obtain nationwide spectrum. And all those communities who are already sick of putting up cell towers? They don’t want more. 

“Google Voice will replace the mobile operators because the price is zero.” OK, where are you going to get mobile access? From a mobile operator who is charging you a for a voice plan whether or not you use it. Or you could go with a data-only plan using a 3G/4G dongle for your laptop. Great: 1) you’re still tethered to a laptop, which is tough to use at the bar when you want your buddies to come down and 2) you’re still using AT&T/Verizon Wireless/Sprint/T-Mobile and paying $60 a month… about the same as a basic voice plan.

“I’ll use Google Voice on Wi-Fi.” Great idea. But where? Home, Starbucks, McDonalds, home, someone else’s home and… where else? Wi-Fi’s not a mobile network (something I’ve been saying since 2003). Terrible coverage. Not useful where you want to make calls.

What it really means: Nothing. Is Google going to become a serious mobile operator using its Android phones, some spectrum somewhere or Wi-Fi? Probably not. Skype didn’t. Vonage didn’t. Once again, Nethead domination of the telecommunication space will remain a fantasy. Bellheads, ultimately will be responsible for paying for, building, and maintaining very complex, very expensive networks. And consumers will keep paying – and paying a lot – for access to those networks.