The hot technology known as RFID is already in use at major companies including Boeing, Ford and Wal-Mart, the world's largest retailer. The Department of Defense has mandated its use. And industry watchers expect significantly broader take up of the technology over time. But, so far, telecommunications companies have been slow to move on the opportunity for new revenues that radio frequency identification could offer, according to Ajit Kambil, global director of Deloitte Research, speaking at The Deloitte Consulting RFID Conference held yesterday in cooperation with TELECOM '04.
"RFID may not change the business model for telecommunications service providers, but it will create new business opportunities," says Kambil.
Radio frequency identification employs ID tags that use RF signals to communicate information stored on an embedded chip, chipset or microprocessor. Stored information could be as simple as an electronic product code or as complex as maintenance records. What makes RFID particularly useful, however, is that the radio technology allows for sensing the location of tagged items. "Think of RFID as smart dust sprinkled around an environment," says Tony Kern, TMT deputing managing partner with Deloitte & Touche.
RFID's obvious application is the tracking and management of products, people and assets. In fact, RFID has been deployed on delegates' name badges on a limited basis at this week's trade show. Speaking at the Deloitte session, USTA Senior Vice President John Abel said putting RFID on attendees' badges enables trade show operators to track attendance without having show representatives run from room to room to count heads.
Manufacturers are using RFID to reduce errors and increase process control, notes Kambil. For example, he says, Ford uses RFID on engine assemblies at key plants to make sure the right parts are going on the right engines. Meanwhile, Boeing has an RFID application that tracks parts. A cigarette manufacturer today employs RFID to ensure ingredients in the correct vats are mixed so the final product has the right chemical makeup, says Kambil. Other manufacturers, he adds, manage temperature and environmental controls and sense damage during shipping via RFID applications.
RFID also can be used to improve inventory and asset utilization, check product compliance, prevent theft, increase speed and efficiency of warehouse logistics, and even "delight" end-user customers, says Kambil.
As for the end-user RFID applications, high-end clothing company Prada in New York issues RFID cards to its customers that track those customers' preferences. Other RFID end-user applications include home appliances that automatically contact service centers in the event of performance problems; RFID-tagged drinking glasses that alert the barkeep when the customer needs another drink; and RFID-enabled cards that give skiers access to particular ski slopes.
So what does this all have to do with telecommunications service providers?
In addition to seeing increased traffic that RFID is expected to drive onto public networks, telecom service providers could position themselves as "value architects" rather than just "dumb pipe" suppliers by offering customers end-to-end solutions incorporating RFID, says Kambil. Such solutions might include network integration and services with guaranteed quality of service, Kambil says. He adds that service providers interested in moving on this RFID opportunity need to establish a circle of partners to put together such solutions, which also could include security features, event analysis and interpretation, and the ability to integrate RFID applications with existing infrastructure and applications.
Creating these complete solutions won't be easy, says Kambil, but it looks like a good opportunity given that RFID applications to date have been designed for use at single companies but will need to scale as they evolve to include multiple companies; given that only a couple of telcos have set out on this course; and considering that telecommunications service providers are uniquely positioned with their existing relationships and competencies in the network.
