NEW YORK-Some recent developments have brightened the longer-term prospects for smart cards in North American wireless communications, although the picture gets cloudier when framed as an immediate prospect.
Opportunity is knocking for expansion of their use in provisioning of telecommunications services. Beyond that deployment, smart-card makers are looking to diversify the use of these chips into wireless commerce, particularly when third-generation networks are in operation.
However, there are competing technologies for this potentially lucrative application. Furthermore, wireless device makers generally are more cautious in their outlook for smart-card applications in wireless commerce.
Although these chips have varied applications, the biggest market is the cellular and PCS world where they function as subscriber identity module cards for GSM carriers. On a worldwide basis today, the GSM air-interface standard is dominant.
TDMA and CDMA technologies still are the leaders in the United States, despite the fact that VoiceStream Wireless Corp. has developed by acquisition a nationwide GSM footprint. Therefore, the decision AT&T Wireless and Rogers Cantel, its Canadian sibling, announced late last year to transition to 2.5-generation wireless using the GSM version of General Packet Radio Service is noteworthy. It represents a significant opportunity for expanded use of SIM cards on this continent, said Jean-Louis Carrara, Gemplus’ director of telecoms for the Americas.
Nextel Communications Inc., an iDEN carrier, “already is using a SIM card, but doing so quietly, and is the first non-GSM carrier to do so,” he said.
“On the network side, TDMA works with GSM. … That means, whether iDEN or TDMA, you can accept a SIM for roaming and go beyond that to integrate the SIM for management of provisioning. … (In addition,) CDMA specs for SIM cards were written in 2000.”
As Gemplus sees it, the mergers in recent years of carriers using different standards has helped foster demand for the flexible approach that SIM cards can offer within the United States. Wireless providers also need to better accommodate wireless subscribers who are frequent overseas travelers and heavy consumers of airtime minutes.
“SIM cards allow networks to ally with networks of other technologies. Applied to multimode roaming, the SIM card can be plugged into GSM, TDMA or CDMA phones so the end user no longer is a prisoner of the frequency their home carriers use,” Carrara said.
Even if they don’t roam, consumers often use more than one kind of wireless device. SIM cards offer a way to simplify their lives, said Deepak Jain, director of mobile communications solutions for Schlumberger Test & Transactions North America.
Although GPRS can be launched without GSM’s use of SIM cards, carriers may find these chips a useful tool, enabling them to offer their customers “portability between different devices,” like wireless handsets and wireless handhelds, he said.
Schlumberger, in its annual smart-card outlook released in early February, said it expects “CDMA operators starting to implement the benefits of the removable UIM (user identity module) standard, which will initially be used to facilitate roaming.”
Ericsson Inc. sees market forces outside the United States propelling the use of smart cards as UIMs, said Michelle French, senior manager of corporate public relations for the company.
“It is true that several U.S. operators are moving toward GSM/GPRS and eventually W-CDMA. This means the SIM card market will expand as more GSM-like products are sold in the United States,” she said.
Unlike Gemplus, Ericsson does “not see a movement to smart-card utilization within iDEN or TDMA, French said. However, Mario DiPrizio, engineering director of the Motorola Inc. Worldwide Smart Cards Division, concurred with Carrara of Gemplus that smart cards are being used in iDEN phones in this country.
GPRS represents a transition to an array of expanded services, which smart cards are well suited to help provision, Jain said. That suitability will become more pronounced as third-generation networks begin offering commercial service.
“In 3G, standards have been adopted for the use of smart cards for subscriber activation for all carriers, although it is optional in CDMA,” he said.
“When you move into value-added services-mobile commerce, information on demand, gaming-there is a parallel way to do this in CDMA without a smart card. But GSM can do it with a smart card, which makes it a bit easier.”
Several years ago, the conventional wisdom was that smart cards would be used for micro-payments for small-ticket items purchased and used on the spot, like soda or fast food. Competition for that niche has surfaced from alternatives. These include additions of electronic payments functionality to automated toll pass transponders and inclusion of electronic purse adaptations in key fobs that gasoline purchasers can waive in front of electronic scanners at the fuel pumps.
“My personal opinion is that Bluetooth might turn out to be less expensive than SMS (short message service) for micropayments,” Carrara said.
From Ericsson’s and Motorola’s perspective, smart cards are just one option for handling m-commerce transactions.
“While smart cards are one possible method to handle m-commerce applications, there are other solutions, such as software wallets,” Ericsson’s French said.
Early this year, Palm Inc. demonstrated a prototype of a handheld computer that contains an electronic wallet with digital receipt functionality, said Carl Yankowski, president and chief executive officer of the company.
“The smart card is a dying deal. Future Palms will be able to make secure point-of-sale transactions through embedded virtual credit cards,” he said.
Today, smart-card makers appear to have set their sights on electronic commerce that involves bigger ticket transactions, particularly purchases of goods or services whose providers are located at a distance from the consumer.
“The main problem on the Internet is identity theft, with more than 500,000 cases in 2000. It is growing so fast it has become a danger,” Carrara said.
“Another issue is that credit-card use on the Internet represents a few percentage (points) of all transactions, but 50 percent of fraud, basically because of (customer) repudiation of (transactions after the fact).”
Wireless telecommunications operators are moving to set up “trusted environments” using public key infrastructure, he said.
“Carriers will be able to enable a PKI, assuring the merchant this is a legitimate transaction that won’t be repudiated,” Carrara said.
A new U.S. law mandating that electronic signatures are as legally binding as handwritten ones is a very significant establishment of a legal framework in which the PKI can function, according to Schlumberger’s 2001 outlook report.
Also of significance is the adoption of the Wireless Application Protocol 1.2 version, which includes a WAP Identity Module containing a wireless PKI, Carrara said. Phones using WAP Version 1.2 are now in development.
In addition, smart-card makers have themselves made a giant step toward interoperability of their chips. Gemplus, Oberthur Card Systems and Schlumberger announced Feb. 20 they have jointly collaborated with Sun Microsystems to develop SIM cards based on a uniform implementation of Java Card technology 2.1 specifications.
“Mobile operators are searching to maximize (return) on their heavy investments and launch a host of value-added services to gain competitive advantage. With this in mind, the issue of (smart-card) interoperability becomes paramount,” said Stephane Mousse, Oberthur Card Systems’ head of marketing for mobile communications.
Open platforms on smart cards open up the possible applications for their use, including banking, cable television set-top boxes and medical care, said Motorola’s DiPrizio. With that p
otential in mind, the handset maker introduced dual-slot GSM phones in Europe several years ago. One slot accommodates the SIM for wireless network access. The other handles a separate smart card that serves as a “portable token” for a variety of other purposes, he said.
Thus far, however, Audiovox Communications Corp. has not felt any domestic demand for inclusion of smart cards into handsets for mobile commerce, said Philip Christopher, chief executive officer.
“The only way smart cards can become a factor in mobile commerce is if the carriers want it,” he said.
“At this point, I just don’t see it, but it is something we are watching.”
In the United States, the impetus for smart-card usage seems to be coming, albeit slowly, from the banking, credit card and medical sectors, DiPrizio said.
“Where can you use smart cards? That’s the perennial problem here. There is not an infrastructure deployed,” he said.
“That is the first thing that must get answered, and then the market will decide on smart cards.”
