RFID Struggles Mount as End of Year Approaches

With Wal-Mart's deadline, technology updates, accuracy problems, incompatibility issues, a new version and licensing fee debates, the imminent RFID road ahead looks treacherous.

It has been written that the wiser the people, the more they are aware of how little they truly know. That unsettling thought nicely summarizes the state of RFID today. With each trial, companies discover how incredibly much they still do not understand. With each investment, they discover how its likely to be much more expensive than they had projected.

Legal intellectual property disputes, a major recent upgrade and organizational squabbling are just three of the latest problem areas, said Erik Michielsen, director of RFID for ABI Research. "By themselves, none of the three situations is a deal-breaker, but their cumulative effect will be to chill progress in the field for several months or more," he said.

The intellectual property dispute involves an organization called Intermec and its IP claims to parts of the key RFID specification, specifically the EPCglobal Generation 2 spec. EPCglobal is the nonprofit organization that is charged with trying to commercialize RFID and other electronic product code (EPC) approaches. It is a joint venture between EAN International and the Uniform Code Council (UCC) and is governed by the EPCglobal board of governors.

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ABIs Michielsen says the hope with some retailers and vendors that they will be able to avoid hefty licensing fees is no longer viable. "I can speak now with certainty: They are going to have to license," he said. Analysts and vendors disagree on what the fees will likely be, although most believe it will a onetime flat fee ($500,000 is the highest figure speculated) and a per-item royalty fee, ranging anywhere from a half-penny to perhaps as much as two pennies.

Christine Spivey Overby, an RFID analyst with Forrester Research, played down the royalty problem. "A lot of the brouhaha over royalties is misplaced," she said. "Royalties will only impact price tags so much."

EPCglobal officials are also arguing with ISO about the part of the proposed specification dealing with RFID tag numbering systems. This is primarily a global issue, with other countries wanting the chips to be easily customizable for their geographies in the future.

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The third problem that Michielsen is concerned about involves the latest release of the RFID specification—Generation2, which was released in mid-December. "Many prestandard products have been sold on the promise that they are firmware-upgradable," he said. "It turns out that often means upgradable only to single- or multiunit use, but not to the dense configuration which is the only one that really matters. Buyers must scan the fine print and be very sure that their purchases are fully upgradable, or they risk having to replace all their readers."

At least one EPCglobal official dismisses many of Michielsens concerns, although he did so without challenging any of the specific concerns. "On the board level, we are totally aware" of those concerns, said EPCglobal board of governor member Mohsen Moazami, a retail vice president with Cisco Systems Inc. "They are being addressed and addressed in a very accelerated fashion. Were making progress to a resolution."

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