Remunerative RFID

Frost & Sullivan estimates that spending on RFID-related hardware, software and services in Europe will exceed €5 billion in 2007.

Whilst not a new technology, Radio Frequency Identification (RFID) is generating increasing interest in Europe due to its many advantages over the currently used trace-and-track technologies. RFID refers to technology that allows an object or person to be identified at a distance, using radio waves to energise and communicate with some form of tag or card.

RFID projects are proliferating in a variety of markets such as retail, transportation, pharmaceuticals and livestock, propelling companies and suppliers to adopt the technology in a bid to cut down costs in the supply chain while enhancing productivity.

Global growth consulting company Frost & Sullivan estimates that spending on RFID-related hardware, software and services in Europe will exceed €5 billion in 2007. While the retail and government vertical markets are likely to lead this spending, transport and logistics as well as manufacturing are also likely to contribute significant shares.

Currently, the high prices of transponders or tags are a major obstacle to the mass adoption of RFID. Manufacturers need to price these components more realistically for RFID to enter the mainstream and realise its true potential in the supply chain. Although this could take time, tag costs are already dropping. Further price decreases are likely to positively impact manufacturers’ unit shipments and encourage them to attempt more large-scale projects.

As far as the opportunities for mobile operators are concerned, Frost & Sullivan believes that RFID holds great potential for operators seeking to increase average revenue per user (ARPU), especially revenue from the low-margin data services.

“European operators have a key role to play in the transport of RFID data from field locations to the back office for at least either one of these two reasons,” notes Frost & Sullivan ICT Consultant Mr. Andrew Tanner-Smith. “First, it is the best technology to allow remote access on a large scale, and second, through the process of fixed-mobile substitution, it replaces fixed telecommunications lines where these have been the preferred data transport method in the past.”

While Frost & Sullivan does not expect significant opportunities in RFID projects to materialise until 2007, it recommends that mobile operators start developing and putting strategies in place to take advantage of these opportunities. It believes that the market will start gaining traction around 2007 due to the ongoing fixed-mobile substitution

Currently, the extent of the operator’s role in a RFID implementation seems to be confined to acting as a conduit for mobile and data traffic. However, many larger European operators are beginning to realise that their contribution to the market could be significantly higher.

“For example, by developing mobile applications, operators are beginning to add value to the mobile enterprise,” remarks Mr. Tanner-Smith. “In the future, Frost & Sullivan expects operators to increase the range of applications they offer to include those that may make use of RFID data, with some companies perhaps beginning to offer enterprise mobility services in this area.”

As the market develops, mobile network operators and wireless local area network (WLAN) providers are likely to gain over fixed telecom networks in terms of carrying increased RFID data. Frost & Sullivan expects the volume of data generated to increase tremendously, to the point where mobile operators could well be transporting volumes of RFID generated data that could be measured in terabytes through their networks in 2009.

“This is not an insignificant amount of data, and operators need to ally themselves with key participants in the RFID industry to turn this projected scenario into a reality,” says Mr. Tanner-Smith. “They need to identify the right vertical markets for their organisations to target and be realistic about the pricing of their data transport services.”

Frost & Sullivan further believes that there is a huge base of potential end users seeking the most economical way of transporting data from the field to the back office. Mobile operators can successfully convert these end users into RFID clients by offering attractive pricing structures and bundling voice and data services into one cost-effective option.