iPhone Users Are About to Be Screwed Over

The next iPhone (presumably called the iPhone 5) is rumored to include a near field communication ("NFC") chip that could be used for ExpressPay/PayPass-like credit card transactions. Last month, John C. Dvorak declared this technology "to be the most onerous ever." Dvorak apparently lives in some crazy world where other phones don't already contain NFC chips and only Apple has ambitions of turning cell phones into NFC-enabled credit cards.

Dvorak argues that NFC-enabled phones would be tremendously convenient, but that the costs of routing your payments through a mobile carrier are much too high. He states:

If you think your banker is a gouger with dubious fees and no-leeway, what do you think the phone company will be like? Yes, let AT&T handle all your money for you, and see how that works out in the end.

Now, I agree: Letting your phone company become entangled with your daily financial transactions is probably not a good idea. And, yes, I know that phone companies would love to do this. But how does Dvorak logically jump from "smartphones will enable mobile transactions via NFC" to "carriers will necessarily be involved with these transactions" to "iPhone users are screwed"?

NFC has a maximum range of 20 centimeters and does not require a cellular connection to operate. There is no requirement that a wireless carrier ever become involved with an NFC transaction. Presumably, the most logical use of NFC would be for PayPal, American Express, Visa, etc. to build mobile applications that link to pre-existing financial accounts and are processed identically to current credit or debit transactions. In this situation, the only way the wireless carrier would become involved is if they started charging a toll to connect to your financial institution's servers (net neutrality, anyone?). Even if this practice were adopted, installing Wi-Fi connections near store registers would quickly alleviate the problem.

In the carrier-controlled application ecosystems of the past, your cellular service provider could ensure that all NFC transactions passed through their applications and show up directly on your monthly statement. Today, however, carriers are unable to limit what shows up in the App Store and Android Marketplace. Consider the numerous credit card processing applications available on both Android and iOS. Your wireless carrier is not taking a percentage from those transactions. NFC transactions are no different.

It seems to me that Dvorak is crying wolf. Of course, this is the same guy who predicted in 2007 that the iPhone would fail and is most famous for stating in 1984 that "[t]he Macintosh uses an experimental pointing device called a ‘mouse’. There is no evidence that people want to use these things."

He's been wrong before.

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