UK Telco: 'We Want to Break the Chicken and the Egg'

The United Kingdom’s largest mobile operator is intent on “seeding the market” with new NFC phones by offering longer-term commitments to handset makers, a business development head at the telco said this week.

Jason Rees, who focuses on contactless and mobile payment for Everything Everywhere Ltd., the joint venture of France Telecom-Orange UK and T-Mobile, said the telco is not interested in short-term purchases of single NFC phone models, but would encourage handset makers to put a variety of NFC models on the market.

"We want to break the chicken and egg (syndrome)," said Rees, speaking this week at the Mobile Payment Services conference in Barcelona, organized by IIR.  He said the telco was keen on "seeding the (NFC) market, in terms of devices, in terms of SIMs."

In response to a question from NFC Times, Rees said seeding the market would mean the telco would make its needs for NFC handsets clear to phone makers two years out, not two quarters in advance, as is often the case with handset procurement. And it would mean committing to volumes with phone makers and “putting cash upfront­,” he said. The telco would tell handset makers, “these are the sort of devices we’re looking for," he said.

"We’re going to flood the market with NFC devices,” he added.

There are at present few NFC phone models available, though some are expected next year. Mobile operators have been hesitant to order NFC phones in part because of the lack of devices supporting the technology, and phone makers have been reluctant to produce NFC phones because of a scarcity of orders from operators.

Rees declined to discuss any current talks the telco is having with handset makers. He also refused to speculate when Everything Everywhere would commercially launch NFC with its mobile-payment partner Barclaycard, the credit card arm of Barclays bank. 

Orange UK and Barclaycard announced the partnership in March 2009, and have hinted an NFC commercial launch could happen before the end of the year. That now seems more likely to happen early next year. The partners introduced a contactless credit card last January.

But Rees said that when the telco does launch NFC, the Everything Everywhere mobile wallet would offer much more than just NFC payment subscribers could use at the retail point of sale.

"It’s lifestyle devices; it’s the third dimension that we see contactless bringing," Rees said at the conference. "If we replicate the physical wallet, we’ve failed."

That could mean not only enabling subscribers to tap their NFC phones to pay for morning coffee, but to ride the London Underground to work, exchange digital business cards in meetings, redeem loyalty points to buy lunch, buy concert tickets over the network and later tap to enter the venue, and download movie trailers or music videos by tapping smart posters.

The telco is still working out its business models, said Rees. That could involve renting space on its SIMs or charging other fees from service providers, such as customer relationship management, or CRM, fees.

"The MNO (mobile network operator) is enabling that interactive relationship and will need to make a deal to make that happen," he said.

While Orange UK and Barclaycard have apparently agreed to their own revenue sharing deal, Rees indicated Everything Everywhere would be working with additional financial institutions in the future, not only Barclaycard.

He said Orange would also soon launch a prepaid payment card in the UK market, in addition to its cobranded credit card with Barclaycard. It was not clear whether the telco would be working with Barclaycard on the prepaid card. Rival telco Telefónica O2 launched what is considered a successful prepaid payment card program, O2 Money, with NatWest bank in 2009. The bank has said it is dropping out of the partnership.

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