To establish a generally applicable NFC business model is difficult because the technology supports many different services with their unique specifics. However as the same people use these services – multi application operation –, and the secure NFC services are sharing the same secure element it cannot be avoided to have a common business model. (Presently only secure NFC services are considered – which make use of a secure storage facility – because we do not think that plain NFC services, not using secure element, could be charged for. In such scenarios the NFC technology is not different from Bluetooth, just using a different type of short range antenna.)
To establish a uniform NFC business model there are a few underlying assumptions, which should be considered or rejected with solid arguments:
· NFC services have benefits, they have value add, and they cost money to provide. Someone has to pay for making these services available for the consumers.
· Users are not accidentally using NFC services, but are deliberately choosing the suitable handsets, and are applying-registering for NFC services because they realize the benefits. They are wiling to pay as much as they usually pay for traditional alternatives and they are also willing to pay reasonable premiums for the added value.
· For most service providers mobile NFC is just a new delivery channel or form factor. They will establish similar pricing structures what they are already used to apply in their legacy operations. Deviation from existing formulas will only be due to technical specifics and changes in the value chain. The new service lines will be assessed on their own merits considering investment requirements, cost saving potential and additional revenue streams.
· As service providers consider NFC services as extension of their legacy operations they will not be willing to accept, adopt substantially different business models from the existing ones, as such move could jeopardize the economics of their core operations.
· The basis of secure NFC is the secure element. Operation and maintenance of the secure element cost money, therefore storage on the chip needs to be paid for. The secure element is nothing else but a special type of commodity and therefore its pricing concept should be simple and straightforward. Factors to consider are: size of space used, length of usage time, and service quality which equals the security level of the chip and the associated post issuance features provided.
Pricing factors which are dependent on the content to be stored, type of service facilitated, or other subjective factors cannot be justified.
· Based on the above assumptions an NFC service has two pricing components. The cost of the storage space, including its management features and the cost of the service.
· In the NFC service structure the user is the center point. It has a lasting relationship with the service provider. The user also has a long term relationship with the card issuer as it uses the secure element for a longer time. In contrast to these relationships the card issuer – service provider interaction is always ad-hoc and is of purely technical nature. (A service provider does not need the space on the secure element for its own use but needs it for its customers and only approaches the card issuer to receive the technical assistance for loading and storing the application on the secure element.)
· Based on the type and purpose of the relationships between the key actors it makes both business and operational sense to directly and separately charge customers for the service and for the storage capacity used. Services should be charged by the service providers according to their own specific pricing policies and storage should be charged by the card issuers based on the specifics of the secure element and the usage requirements.
· In the specific scenario where the card issuer is also a mobile operator and the secure element is a SIM it would make sense to establish a pricing plan for the use of the secure element just like the pricing plans for broad band communication. Users could pay a monthly fee for total or partial usage of the available capacity of the secure element, which they may or may not make use off. In such a pricing structure users would receive full control over which applications they would like to have on their secure element, while mobile operators would have a stable, predictable revenue source from utilizing their SIM.
In our view the above points are valid for all commercial operations and may be challenged only
· in pre-commercial environments
· in situations, where there are not enough NFC services available and therefore user motivation is limited
· in specific market situations
Such may be the case when consolidators are appearing on the market as independent actors, are buying storage capacity in large volumes at a discount from card owners, are bundling a number of different services and are selling this combo in a package to their specific customer base. (However except for the volume discount probably even this model could be derived from the above concept.)
Based on the listed issues it is possible for all key actors to consider which are those factors which may influence their own pricing decisions, and under which circumstances they are willing to deviate from the above considerations.
The above approach successfully separates the pricing decisions of the service providers from that of the card owners, card issuers, allowing the preparation of quasi independent business models. The “only” remaining challenge is, that initially there are not too many NFC services available, consequently the perceived “benefit value” for the consumers is quite low, which applies a relatively low price cap on the combined NFC service package.
This constraint however reintroduces the need of pricing cooperation between service providers and card issuers to elaborate joint subsidy concepts for the users.