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Alcatel-Lucent outlines carriers’ role in contactless future

New venture, Touchatag, aims to enable the ‘Internet of Things’ on as many things as possible

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Wireless operators have realized by now the ways in which they could benefit from the increased emphasis being placed on wireless applications and services. What Alcatel-Lucent (NYSE:ALU) is hoping they’ll also soon discover is the potential to use wireless phones as the vehicle to bring these apps and services to life across a number of devices infused with the Internet.

Alcatel-Lucent calls it the “Internet of things.” It is enabled through attaching a radio frequency identification (RFID) tag to an object , which associates it with a Web page or app. A business card could link to a professional Web site when run over an RFID scanner. A six-sided die could serve as an iTunes remote control, causing the program to play or pause a song or skip to the next track as the cube is flipped to different sides. A two-year old could learn to ‘tweet’ her activities on Twitter by swiping a toy. These are just some of the ideas bred from Alcatel-Lucent’s latest venture, Touchatag.

Touchatag was born out of Alcatel-Lucent’s new business incubation strategy. The company is identifying and partnering with startups and universities to encourage innovations from outside of its research arm Bell Labs to find ways to be more disruptive in the industry. The end goals for Alcatel-Lucent are to either transfer the innovations to its own business units or spin the ventures off into new companies.

Touchatag was the first company to come from this model of innovation in March of last year. It is now one of five active ventures in Alcatel-Lucent’s portfolio, according to Touchatag general manager Anthony Belpaire. The idea came from a student in at one of Alcatel-Lucent’s partnering universities in Belgium. For the network infrastructure vendor the venture represents a departure from its normal business model. Instead of selling big boxes to big carriers, it is selling devices directly to consumers--and learning as it goes.

“It’s a vision, which allows us to link, on the one hand, the world of tangible items, everyday items, with the Internet world which is rich in terms of services and applications,” Belpaire said. “We believe that by just looking towards 3 to 4,000 objects we cross each day as a consumer, if they could become interactive, if those objects could become our guides to get information and to access services, then all sorts of new added-value applications can arise.”

An offshoot of this is the burgeoning industry of mobile payments and near-field communications (NFC). NFC is a low-power, standardized RFID technology that works in close proximity – about four inches – to an RFID reader. The technology primarily uses stickers like Touchatag’s today, due to the low penetration of NFC-enabled mobile devices, but it can work in any mobile phone, consumer electronic, TV, PC or set-top box that has an embedded NFC reader.

Belpaire is a firm believer that that within a couple of years, 80% of mobile phones will be equipped with NFC, as is already the case in Japan today. Research firm Gartner is also optimistic on the potential of NFC in mobile phones, but it lumps the technology in with other forms of mobile payments, such as SMS and mobile browser transactions. Within this year, Gartner estimates that mobile payment users will reach 74.4 million, a 70% increase over last year’s 43 million users. By 2012, this number should surpass 190 million, the firm said.

The typical business case envisioned for NFC is the key chain credit card, where a device run over a scanner authorizes payment, but, as the scenarios Belpaire outlined demonstrated, NFC and other RFID technologies can be used for much. Rather than just link an object to your credit card or bank out, these technologies can link any aspect of the virtual and physical worlds. Touchatag isn’t the only company exploring these possibilities. Start-up Violet sells its own home RFID reader and object stamps, and has even developed Internet appliances in odd form factors—such as a rabbit—that use RFID cues to relay personalized information from the Web.

“The ultimate dream is that within a couple of years, consumers will have NFC mobile-handheld devices,” Belpaire said. “With that, they can really trigger in a contactless manner, a one-touch manner, all types of mobile applications and payments, like interacting with a smart poster to get more information right away on your mobile device. Our vision is that the wallet today becomes substituted by the mobile phone.”

If this vision comes to fruition, there is ample opportunity for Alcatel-Lucent’s core customer segment, mobile operators. The more apps, for both enterprises and consumers, that can spring from this NFC chip, the more potential ways for carriers to get a cut of the action, according to Belpaire. There are also additional services, such as interactive and targeted advertising or couponing, which could drive revenue for all parties in the ecosystem.

That being said, Touchatag isn’t waiting around for handset makers and carriers to get on board with NFC. That’s where the stickers – a strategy some have questioned – come into play. Contactless cards and RFID stickers are an interim step, Belpaire said. So far, Nokia has led the market in NFC-capable handsets, but only has three in the pipeline. Semiconductor company NXP last month also introduced an industry-standard NFC chipset that handset makers can embed in future handsets. The chip will be available in mass in the third quarter, around the time Nokia’s handsets will also debut.

“Rather than being dependent on NFC devices, we have said okay, let’s leverage more today on the contactless card and give them to our B2B to B2C customers and then at any moment in time, we can support a hybrid solution,” Belpaire said. “All those applications can be linked to an NFC device or phone, so we are not depending on the adoption speed of NFC.”

Consumers can buy the Touchatag RFID reader and 10 tags for $40 on Amazon and then use the service for free. They can create, share and download other users’ apps online for their own use--activities that Touchatag monitors to see what’s working and what’s not. It relays this knowledge to app developers to improve upon. Alcatel-Lucent also sells the Touchatag service for professional use in a rental model.

The company last week announced a partnership with Belgacom-based PingPing to provide mobile payments based on contactless cards and eventually NFC-enabled mobile phones. Touchatag is also working with Accor Services, which provides paper meal vouchers to companies to offer as an employee benefit. Through Touchatag, Accor is trialing making the vouchers that go out to 13 million employees’ virtually using contactless cards.

“In the long-term, see ourselves adjacent to the business of Alcatel-Lucent, meaning that we can offer long-term value to customers in the field of carriers, mobile service providers and enterprises,” Belpaire said.

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© 2014 Penton Media Inc.

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