Operators Vie for SIM-Based NFC Control
Their biggest bargaining chips include security, a billing relationship with consumers and a tight grip on smartphone subsidy costs.
"At this point, it seems that operators will be the ones who will be in a position to market NFC services better to their large pools of customers. The customers already trust them with their credit card info (think of direct debit with postpaid customers)," Pyramid Research analyst Stela Bokun said in an email interview. (See Here Come the NFC Phones and CTIA 2011: Operators Avoid App Syndrome With NFC .)
Operators could also subsidize certain phones, such as those with NFC chips, more than others, to encourage customer take-up. That pricing power will become important in markets such as North America where the operators control the channel, Bokun says.
Security is a potential stumbling block for NFC, but here again, the operators have an advantage in that they can encrypt the technology on the SIM. This also gives them control over the consumer relationship, as opposed to a setup in which the secure element is built into the handset.
Both avenues may ultimately be secure, but consumers' perception of the safety of their information may be most important here. The SIM already houses private subscriber identity information and could prove to be the most trusted channel amongst consumers. (See OS Watch: RIM Battles Carriers for Mobile Money.)
Operators race to market
For the wireless operators to capitalize on NFC, however, it will be a matter of moving quickly and marketing heavily.
In the U.S., it's a race between Sprint Corp. (NYSE: S) and the Isis joint venture of AT&T Inc. (NYSE: T), Verizon Wireless and T-Mobile US Inc. . (See Sprint Stakes Its mCommerce Claim and US Carriers Combine Mobile Wallets.)
Sprint has said it can (not necessarily will) have services up and running this year, while Isis has promised commercial deployment in early 2012, but right now they are heavy on hype and light on details.
Providing the motivation to move quickly is the existence of vendors that are more agile and too strong to be left out, namely, Google (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL) They use closed operating systems and can build the secure element directly into their handsets, Bokun says, and they're already making moves in the space. (See NFC Forum Brings In Google & 31 Others and Google, Apple Fight Carriers for Mobile Money.)
"While the number of different NFC initiatives that has been emerging recently can be seen as a potential danger contributing to the further fragmentation of the NFC space, I believe that a variety of options is good at this stage of the NFC market development and will ultimately give rise to a healthy NFC ecosystem in the next couple of years," Bokun added.
— Sarah Reedy, Senior Reporter, Light Reading Mobile