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More Than 5 Cents

Friday, January 12, 2007

by Adi Tedjasaputra

The aggressive marketing campaign for RFID standards led by EPCglobal has been successful. At least, many who have heard about RFID, most likely have also heard about Electronic Product Code (EPC), EPCglobal standards or EPCglobal. Some even falsely identify RFID with EPC. There is no doubt that the EPC branding is in the mind of many people, for better or for worse.

5-Cent RFID Tags
Ideally, a marketing power should come with a responsibility to fulfil promises advertised in the marketing campaign. Unfortunately, in the real world, promises do not always come true in time and people often get disappointed, and sometimes confused and frustrated.

How many times have you heard or read people talk about 5-cent RFID tags?

Here, instead of discussing whether the 5-cent tag is a myth or a feasible vision, it is necessary to point out that 5-cent price target was originally introduced by Sanjay Sarma and his colleagues, who are also involved in the development of EPC. Riding the 5-cent buzz, EPC, a unique numbering scheme endorsed by EPCglobal, has gained popularity in the recent years, at the expense of RFID technology and industry in general.

We quickly determined that if RFID tags were ever going to have a shot at being widely used, a 5-cent price target was important for both psychological and commercial reasons. In return, though, the volumes would have to be very high—for example, more than 5 billion bar codes are scanned daily today. The problem with RFID tags at the time was that the industry was "stuck" in a higher-margin, lower-volume mind-set. At the Auto-ID Center, we set about flipping it to a high-volume, low-margin approach. (Integrating RFID, Sanjay Sarma, ACM Queue vol. 2, no. 7 - October 2004)

There is no doubt when Sanja Sarma and his colleagues envisioned 5-cent RFID tags, they were comparing RFID tags with barcode labels and referring only to retail supply chain item tagging, instead of the general RFID tags and applications.

Nevertheless, when the news of 5-cent RFID tags was published in the media, many became excited and over-enthusiastic. Some unrealistic expectations started to be unfolded. Many people easily forget or ignore the underlying assumption that an initial large volume purchase is necessary to achieve the 5-cent RFID tag vision.

Is Gen 2 the Silver Bullet?
Realising the shortcomings of the Class 0 and Class 1 UHF Air Interface Protocol Standard, EPCglobal began its work on the second generation of UHF air interface protocol mostly known as Gen 2. The standard was later ratified by the International Organization for Standardization (ISO) last year.

When EPCglobal later realised that the strengths of UHF RFID technology comes with its weaknesses and limitations, the organization started to look into HF RFID technology and formed HF Air Interface Working Group. The Working Group currently works toward the extension of Gen 2 into HF band.

The less known facts are actually the cost for involvement in the EPCglobal and the cost of adopting EPCglobal standards. If you are an end user, you have to pay at least US$750 (EPCglobal North America) for the initial subscription fee, in addition to other fees. Solution providers will have to pay more. The subscription fee schedule for companies outside the United States is less transparent, but since EPCglobal is a joint-venture between GS1 and GS1 US, one may expect similar fees to be collected as well.

Beside the high organisational and infrastructure costs, the design of current Gen 2 protocol standard ironically does not reflect any breakthrough towards the vision of 5-cent RFID tags, especially with added security feature extensions for RFID Supply Chain item-level tagging that will increase the total tag manufacturing cost.

The result of unrealistic expectations is predictable: disappointment. RFID vendors will fail to meet unrealistic expectations already generated by aggressive and unrealistic marketing campaign, including the demand for 5-cent tags. RFID technology and industry will get more bad press, in addition to the current opposition from already flourishing privacy groups. Wait-and-see attitude towards RFID implementations will become more common among potential RFID adopters, including the ones outside the retail supply chain industry. The expectation of large volume purchase that can decrease general RFID tag price will happen in a very slow pace, along with various setbacks.

Fortunately, there are hundreds of RFID applications that are independent from the need to adopt EPCglobal standards. These RFID applications are primarily unrelated to the supply chain industry. Nevertheless, we still urgently need a healthy dosage of marketing campaign that is balanced with rational and realistic expectations and actions to move beyond the current hype. We need to prevent one drop of indigo to stain the whole cauldron of milk (*).

(*) "One drop of indigo stains the whole cauldron of milk" is an Indonesian proverb that means one minor ill behaviour can ruin the whole good things or efforts.

Send your comments and discuss.

Labels: 2.0, epc, epcglobal, iso, privacy, rfid, scm, security, tag, technology