BOSTON-Smart cards are poised to move beyond their role in identifying Global System for Mobile communications subscribers, due to momentum outside wireless and beyond U.S. borders.
The challenge both for telecommunications carriers and for smart-card manufacturers is to harness these forces or risk losing their grip on the revenue potential of value-added services delivery facilitated by subscriber identity module cards.
In the United States, a well-developed infrastructure for reading magnetic-stripe payment cards has stymied the efforts of banks and credit card companies to move to a smart card-based system, according to speakers at International Business Communications’ “Smart Cards for Mobile Telecommunications” conference, held July 28-29.
However, wireless network providers already have a well-developed infrastructure, and GSM carriers already identify and track their customers using the removable and programmable computer chips known as smart, or SIM, cards. Wireless telecommunications devices in this country currently use 62 percent of all smart cards sold here, according to Alyxia T. Do, principal smart-card industry analyst for Frost & Sullivan, San Jose, Calif.
Therefore, financial institutions are eyeing wireless telecom as the infrastructure gateway to smart-card deployment for non-telecom functions.
On the other side of the globe, Chinese and Japanese telecommunications regulators have recognized the value of smart cards in promoting interoperatibility among many kinds of devices for executing and delivering a variety of transactions and services. Consequently, they are riding hard on the Code Division Multiple Access sector to corral it into providing smart-card access for their technology.
“There has been some hostility on the part of the Qualcomms of the world. But Unicom in China has announced it will debut a CDMA network with smart cards from day one, and China is so large a market it will drive the world,” said Leo Legaspi, director of wireless telecom marketing for Gemplus Americas, Emerson, N.J.
“It is a race, and CDMA doesn’t want to be disadvantaged or people will think it only works in the United States and China,” he said.
Like CDMA, Time Division Multiple Access, which is used predominantly in the United States, relies on algorithms and authentication keys built into the handset, rather than a chip. However, the Universal Wireless Communications Consortium, a TDMA organization, also is at work on ways to deploy smart cards for non-telecom uses in TDMA phones.
The multiplicity of devices that can use smart cards poses a threat to cellular and personal communications services providers that don’t move quickly to incorporate them, said Do of Frost & Sullivan. Although domestic mobile telephony in all radio-frequency technologies promises to continue as “king in the throne” for smart-card usage for years to come, carriers must adapt quickly.
“The smart-card industry is the biggest threat to cellular telcos because there are competing technologies-[personal digital assistants], smart pagers, global positioning systems-that can use smart cards and are competing for the end users,” Do said.
“We (the cellular/PCS industry) are pretty late, unless we get a move on, in changing end-user behavior to do more than just make calls.”
The digital wireless age dawned three or four years ago with the offering of “distinct services over separate networks, and (already) it is moving to integrated services over common networks,” said Sami Nassar, director of telecom markets for Schlumberger North America Smart Cards and Terminals, San Jose, Calif.
“All networks now can provide what other networks can provide, and this is a major change. Cellular, Internet, cable television, wireline, paging (and) satellite can offer voice, e-mail, e-commerce, Web browsers, information services and corporate data.”
Paradoxically, carriers will have to determine how to retain customers while freeing the smart card from exclusive use in their device, allowing it to become a transportable computer chip uniquely identified with an individual customer-a next-generation version of the credit card.
At the same time, smart-card manufacturers will have to provide SIM cards whose technologies can interface and inter-operate with those produced by their competitors.
“The new smart-card market is predicated on communication between components-devices, cards and networks-whoever they are supplied by, and interoperability relates both to hardware and software,” said Duncan Brown, director of research for Ovum Inc., Burlington, Mass.
“There will be a killer combination of applications based on the target card holder and (his/her) pattern of use, and this is how you get to a critical infrastructure mass.”
Physical standards for the smart cards themselves “are pretty much a done deal,” he added. Platform and applications standards are the next hurdle.
“The reality in the smart-card market is that the chips vary considerably, but the operating systems smooth over the differences,” Brown said.
Today, there is the London-based MultOS platform standard, primarily used for financial transactions, and the Sun Microsystems Inc. JavaCard. Microsoft Corp. has published standards for its Smartcard for Windows, which has not yet been commercially deployed.
“There is no technological reason why Java can’t work with Windows, only political reasons,” Brown said.
“Because both standards are published, it is entirely possible someone will do this whether Sun and Microsoft like it or not.”
Applications standards that work independently of operating systems “are the way to go,” Brown said. GSM has incorporated these. Visa is leading development of the Common Electronic Purse specification. American Express is developing the T&E File Structure, a mechanism for describing travel and entertainment applications.
Patrick Gauthier, vice president of smart-card applications and market development for Visa, said he likes “JavaCard for its strong built-in security, and Smartcard for Windows because of the ability of Microsoft to reach (software) developers.”
Visa, he added, is looking for a single “applications tone, similar to dial tone, that is device-independent.” This will provide a channel so Visa can install the back-office infrastructure, which comprises about 70 percent of the cost of smart-card systems.
Referring to telecommunications carriers, Gauthier said, “networked delivery of services and electronic commerce becomes more complicated when you’re a network operator.
“Do you resell and take a commission? Do you become a portal yourself?”
The double-edged sword of threat and opportunity posed by the explosion of value-added services that can be made available with or without SIM cards is of continuing concern, said Bertrand Salomon, marketing manager of products and services development for French GSM 1800 operator Bouygues Telecom.
“We control user access and try to leverage on our knowledge to retain customers,” he said.
“At some point, the market will be completely open and the customer will be able to choose whatever portal he wants, so we will have to compete.”
