The proposed NFC-based mobile payments joint venture in the US between AT&T, Verizon Wireless and T-Mobile USA poses some interesting problems. While the mobile money community has focused on the partnerships, the impact and the business models, we’ve overlooked the big prize for the mobile industry: who will make the phones?

We know that people won’t buy phones because they have NFC. They buy the phones they want and if the phones have NFC the customers might happen to use the feature. For all the love of megapixels and apps, what a phone looks like governs 80 percent of the buying decision. Some years it might need to be thin or pink or have a touchscreen – but never does anyone say “I want to buy my sandwich with my phone.” Still, someone has to make it work and secure, so the new JV has its work cut out. While AT&T and T-Mobile will have the secure element in the UICC (a posh name for a SIM), Verizon uses CDMA, and CDMA doesn’t have a SIM in the US.

There are a few options for where the secure element could go. It could be in a CSIM, the technology formerly known as a RUM, which is the way Korean CDMA phones have a SIM, or at least something removable which identifies the user. Or it could go in a microSD card, or it could be embedded in the phone. The advantage of a microSD is that there is a possibility of putting not just the secure element of NFC into it, but having the whole NFC solution in the card, including the RF and antenna. This, in theory, makes any microSD phone NFC capable. However, radio is fickle stuff and if the microSD card is sandwiched between an LCD and battery, an NFC signal is unlikely to find its way out of the phone. The proposed solution is to have handsets which are sympathetic to the problem and to ask the user to know where the point of contact for the NFC is, under the name ‘sidetap.’ All of which rather negates the advantage.

The likely solution for Verizon is to go embedded. The operator is big enough and buys enough phones to be able to commission a custom phone. Even if the engineering costs of a dedicated NFC device make the profitability of one phone marginal for a manufacturer it’s tempting to do a deal and keep a major customer sweet.

The two GSM operators have an easier time of the technology. They will go Single Wire Protocol and have very similar conversations with all the handset manufacturers.

Exhaustive digging to find out who might be the likely suppliers to the new initiative hasn’t turned up anything concrete. There is nothing in the FCC database of recently-approved handsets that shouts out as a candidate, although there are some interesting Point-of-Sale terminals and quite a lot of Docomo FeliCa handsets. You have to wonder why the Japanese manufactures are seeking US approval for domestic products. It’s not like anyone remembers South Korea’s Helio.

So, on the basis of supposition, who is likely to win the massive order to supply AT&T and T-Mobile with NFC handsets? A quick scan of what’s out there now gives us the Nokia 6126, the Samsung Star and Sagem Cosyphone. None of these are recent enough or cool enough to be the flagship for a new technology. However commonplace we might portray NFC as being, it’s always going to be the early adopters who will try things like NFC first.

You might point to the recent Nokia announcement that all smartphones will have NFC. And Nokia have certainly been the pioneer in the technology, but the announcement was one of intent and it’s unlikely the phones will exist in time to play a part in the US venture. While Cosyphone is interesting it’s not the kind of thing a geek would want. Sagem’s not-quite-secret Android phone would fit the bill nicely, but Sagem is hardly a name that resonates with US consumers.

Samsung has to be the front-runner, with either an Android phone or when based in its own bada platform. They could build similar devices for both CDMA and GSM networks making joint marketing easier; Samsung is the best company in the world at small volume projects and rapidly scaling them to mass market. It also has relationships with all the main operators. The brand is strong too; it’s a massive company making everything from ships to shoes.

A big launch like this is unlikely to tie its fortunes to a single supplier and as much as Samsung is likely to be the top choice there are lots of other rumours. The favourite rumour is, of course, Apple. Not just because talking about Apple has taken over from film reviews as the source of the most vicious arguments on the Internet – but because the NFC community wishes it was so and points to Apple’s NFC patent filing as proof that they must be doing something. AT&T will dearly want an NFC iPhone but given Apple’s talent in using iTunes as a payment mechanism and cutting out the operators it’s unlikely they will hand a revenue stream to the banks, operators or whatever other form the joint venture takes.

There has been talk in hushed tones of Taiwan’s HTC, and of a number of homogeneous Chinese handset manufacturers looking to NFC as a stepping stone out of their home markets. But making handsets is difficult and it’s unlikely that the operators would be brave enough to include their own-branded handsets. Sharp is often good at being a halfway house between operator-branded and major manufacturer, but as they are still licking their wounds from the abandoned Microsoft Kin project I’d rule them out.

So, without any hard evidence my vote would be Samsung as lead and HTC as second string. With BlackBerry and iPhone as the dominant brands in the US it’s going to take a while to build usage – particularly given the move to two-year and longer contracts slowing down handset renewal rates – but given some patience it’s the NFC opportunity that shows the greatest potential ever.

 

Simon Rockman is head of the GSMA Mobile Money Exchange.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members