NFC sees light at end of the tunnel with transit projects

As city transit systems adopt NFC, Nokia and other vendors are getting ready to announce compatible phones, says analyst

Short range communication using NFC (Near Field Communication) circuitry embedded in mobile phones has had a difficult journey to market, but it may soon see light at the end of the tunnel with increasing adoption for city transit projects, according to analysts.

Last week, Nokia announced that it will put NFC on some of its Symbian-based smartphones next year, while wireless chipmaker Broadcom acquired NFC specialist Innovision Research & Technology.

Integrating NFC into smartphones makes more sense than having it in the simpler NFC phones Nokia offers today, according to Jonathan Collins, principal analyst at ABI Research. A growing number of NFC chipset vendors will give phone vendors more choice, and result in lower costs because of increased competition, he said.

The announcements from Nokia and Broadcom are part of broader trend towards NFC adoption. For example, the Czech city of Pilsen, in cooperation with network operator O2, is using NFC for public transit ticketing, and the Moscow Metro is working with mobile operator MTS to offer an NFC ticketing system during the fourth quarter.

"It seems that in the last few months there have been a number of important developments, which is a positive sign for NFC going forward. People are starting to latch on to the commercial potential," said Howard Wilcox, senior analyst at Juniper Research

Rolling out NFC for transit or metro ticketing is an application for which NFC is ideally suited, according to Wilcox. Allowing people to use it for contactless payments in stores will be more challenging. The difficulty is not with putting the technology on the phones, but rather in upgrading the point-of-sale systems in stores with contactless readers, Wilcox said.

"Until retailers and merchants can see that people have these devices and want to pay with them, they are not going to install the point-of-sale equipment that is needed. But at the same time people aren't going to want to have NFC phones until they can see a means of using them," said Wilcox.

That Nokia continues to stand behind NFC isn't enough to make the technology ubiquitous, according to ABI's Collins.

However, Nokia isn't the only phone vendor that will be backing the technology: Others have NFC-equipped phones in the pipeline, according to Wilcox.

Companies that want to start offering NFC services don't necessarily have to wait for the phone vendors to integrate NFC, though. There are a number of interim solutions, including NFC stickers, NFC SIM cards and NFC microSD cards.

Putting NFC on a microSD card is an interesting market opportunity, because it allows other companies to offer NFC services without having to depend on the mobile operators or the handset manufacturers, Collins said. Users can keep their existing phone, according to Sandy Shen, research director at Gartner.

But the interim solutions also come with their own set of drawbacks, including reliability, according to Shen. For example, the antenna on the microSD card may not work well if the phone has a metal casing, she said.

In the end, the NFC market is still in development. But partnerships are coming together, the technology is more than ready and the handset vendors and operators are beginning to firm up commitments and ideas around it, according to Collins. Still, operators won't roll out NFC-based services widely until next year, he said.

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Mikael Ricknäs

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