NFC TimesThe premier source for news, analysis and commentary on
Near Field Communication and all contactless technology

UPDATED: Facing the prospect of market fragmentation and threats from such new mobile-commerce players as Google, the three largest mobile operators in the United Kingdom plan a joint venture to provide a "one-stop shop" for mobile advertising, payment, ticketing and other services in the telcos’ planned NFC mobile wallets.

The mobile operators, Everything Everywhere, Telefónica (O2) UK and Vodafone UK, say they will continue to develop competing products, such as their own branded wallets, but will offer a single point of commercial contact and technical standards for merchants, banks and advertisers to use to deliver their NFC services to subscribers of the three operators and potentially other telcos that support the common mobile-commerce platform.

The mobile operators say the joint venture, which the telcos are funding with an undisclosed amount of capital, would enable service providers to put credit, debit, loyalty and membership cards, along with transit tickets, couponing and advertising offers onto NFC phones the operators sell to their subscribers.

It’s similar to the Isis joint venture in the United States, made up of AT&T, Verizon Wireless and T-Mobile USA, which is planning to enable payment, couponing and other applications but has abandoned plans to introduce its own payment network.

“Any bank can come to the JV and in a one-stop shop enable its physical products to be virtualized on mobile wallets, rather than having to do it individually to each of the operators,” said Ronan Dunne, CEO of O2 UK, in a press conference call today.

Dunne said O2 still plans to introduce its own Visa-branded prepaid payment applications on its NFC phones, which it expects to launch during the second half of 2011. Telco Orange UK, part of Everything Everywhere, launched its Quick Tap NFC payment service with UK issuer and acquirer Barclaycard last month, one of the first NFC rollouts worldwide. Vodafone UK has not disclosed its NFC plans and has been seen to be holding back to watch market developments.

The NFC services of the three telcos would support the joint venture standards, after they are drafted.

The venture, which still must get approval from UK regulators, would make the operators’ SIM cards the required secure element, which could enable the telcos to charge fees from banks and other service providers to store and help manage their applications on NFC phones.

Common Promotional Platform
And the operators see an attractive opportunity to earn revenue by enabling merchants and other advertisers to make promotional buys across their subscriber bases.  

The telcos would divvy up the revenue based on the coupons and advertising they deliver to subscribers, who would have to opt in to receive the offers. The joint venture itself would keep a commission, Tony Moretta, director of mobile commerce for Everything Everywhere, told NFC Times. Part of that would go for the cost of generic marketing of the mobile-commerce platform and a sales staff to talk to advertisers.

“You can imagine, you send someone a two-for-one coupon to their phones, that coupon could be redeemed at the same time as payment,” he said. “We start to bring those two things together.”

The offers would be appealing to big merchants that want to reach a certain demographic, noted Guy Laurence, CEO of Vodafone UK in today’s press conference. He, like Dunn and Everything Everywhere CEO Tom Alexander, noted in the conference that smartphone penetration in the United Kingdom is perhaps the highest in Europe.

“It transforms the industry, actually it breaks open the industry for them because they recognize the power of the device,” said Laurence. “You take someone like Starbucks. Let’s say they want to reach 18-to-24 year olds, and they want to reach a couple of million of them. Currently they have to go around to each operator to try to build enough critical mass to get to that number of customers. Now they can go to one place.”

The telcos already enable mobile promotions but on an individual basis, using SMS and other non-NFC technologies.

Coming Clash with Google?
With the planned joint venture, the UK telcos also are responding to threats, such as those from Google, which this week disclosed in London that it is planning to introduce its Google Wallet in Europe during the first half of 2012, said Tim Jefferson, head of The Human Chain mobile consultancy. While Google didn’t say it was entering the United Kingdom in particular, the country, which also has the highest penetration of contactless readers in Europe, is no doubt a prime target.  

Google, which is introducing its wallet in the United States this summer, plans to make revenue from NFC by delivering coupons and other targeted offers, much of it through its Google Offers service.

“This is just what is needed to get things moving in the UK market,” Jefferson said of the proposed joint venture. “But it is clearly a defensive move by UK mobile network operators, which are concerned about other players, such as Google with their Google Wallet and Offers and taking market share and at best sidelining carriers.”

Google’s vice president for mobile payments, Osama Bedier, told NFC Times this week that the search giant would be willing to work with mobile operators and would agree to put Google Wallet applications on SIM cards the telcos issue.

But the telcos might clash with Google, since both parties are planning branded wallets and require some type of control or management of the secure element.

Representatives of the UK operators would only say today they would talk to Google, just as they would with other service providers interested in supporting their m-commerce platform.

Moretta contends the planned joint venture is not a response to a threat from the Google Wallet, since the UK telcos have been discussing the joint venture since at least the first of the year, well before Google’s unveiling last month of its wallet. There had been reports of Google’s plans well before that, however.

“This would be a common wallet platform,” Moretta told NFC Times. “We are trying to make sure the offer is a consistent experience. If we can do that with Google, we’d be up for discussion.”

O2’s Dunne at the press conference also rejected reported criticism by smaller British telco Hutchison 3G UK that it was excluded from the joint venture. Dunne contends the platform will be open to all.

“We didn’t explicitly exclude Three, just as we didn’t exclude Google or Facebook,” he said. “Everyone has an opportunity.”

Dunne said that while O2, Everything Everywhere and Vodafone would each own one-third shares of the joint venture, they would be “customers” of the JV just like other service providers.

Requiring SWP-Enabled Phones
The joint venture would also draft specifications for NFC handsets and for how to deliver applications and offers to the phones and managing them there.

The joint effort could accelerate the availability of NFC phones, which are scarce the moment, said Everything Everywhere CEO Alexander.

“You’ve got to remember that the three of us, we buy considerable quantities of handsets and have a lot of discussion with the handset manufacturers,” he said. “They’ve actually been looking for somebody to put their hand up and say, yes we do want to embrace NFC in a big way.”

The specifications requiring NFC phones to support the single-wire protocol standard, SWP, and SIM-based applications also could improve availability of these types of handsets, agreed Moretta. Many handset makers are planning to introduce phones with embedded secure chips that may or may not also support SWP.

The requirement for SWP in all phones the three telcos buy also would reduce fragmentation of the technology, he said. Both on the technical side and commercial side, fragmentation and an inconsistent user experience is one of the main things that could kill NFC for consumers, said Moretta.

“We thought there was a risk for fragmentation,” he said. “We think this is a product and service consumers want. What we recognized together, we are giving NFC on mobile a much greater chance of success.”