Hot on the heels of a recent announcement that it was doubling the number of NFC-enabled phones being rolled out to subscribers by the end of 2012, to 2.5 million, Orange France will also begin its rollout of NFC-enabled SIM cards to all new postpaid customers in France. Orange France is getting very serious about NFC and has taken the initiative to be the focal point of NFC activity in the country, but it still has to convince all the other players in the ecosystem that it should be their ‘trusted partner.’

Billed as the first large scale NFC offering in France, it aims “to enable the mass deployment of contactless mobile services.” Orange becomes the first operator in Europe to deploy NFC SIM cards nationally, a feat only achieved in Korea until now. The strategy carries some considerable risk as there will be very few places that subscribers will be able to use the new SIMs in the short term. Orange, no doubt, feels that by pushing out NFC enabled handsets and high security ‘UpTeq’ SIMs, developed jointly with Gemalto, it will make things happen faster.

Orange has at least 12 NFC enabled phones available, with the first launch two years ago as part of a multi-operator trial in the city of Nice. It has also released its own-branded NFC-enabled Android phone in France and the UK, using the Intel-based reference device design, and has committed to supporting Microsoft’s Windows Phone 8 mobile wallet.

To date NFC activity has been restricted to limited city trials funded by the French government. NFC Times reports that two banks, BNP Paribas and Crédit Mutuel-CIC, and probably a third, Société Générale, are planning national rollouts of NFC payment, making use of a growing number of contactless point-of-sale terminals, that are yet to reach critical mass.

For Orange, is this a case of ‘build it and they will come’ or is it a clever strategy to ‘seed the market’ by equipping millions of its subscribers with phones and NFC SIM cards in the hope it will prompt banks, transit operators and other service providers to roll out services. Sources claim that Orange will be paying about €2 extra (US$2.50) for each of the NFC SIMs and it issues up to about 5 million new and replacement postpaid SIMs a year, so the rollout would cost it about €10 million for the first year.

That’s quite a hefty investment but it is dwarfed by spends on network and IT. The question is whether Orange can convince all the other players that it has a key role to play in the NFC ecosystem and whether the superior security features offered by NFC SIMS will warrant the extra cost that Orange will add. Presumably, it will be looking for a ‘rental’ fee from each provider to allow them access via a SIM tool kit so that individual services can be activated and deactivated on the SIM over the air.

This level of security does not exist with plastic cards, NFC stickers, stored value cards, etc at the moment and the potential cost savings from reduced fraud must be considered by anybody wishing to offer NFC services. The NFC SIMs are not restricted to payments functions only. They will double up as loyalty cards, wallets, identity verifiers and, most importantly, as transit cards for rail and bus services.

It will be interesting to see how Orange markets these features to potential partners and how quickly it can become the pseudo standard for NFC in the country. If it does succeed it will become the role model for many other CSPs holding off on the investment. Orange must be congratulated on making such a bold move and not waiting for the market to pass it by. Are we starting to see CSPs become more aggressive and less risk-averse? Let’s hope so.

First published at TM Forum as The Insider, 28 June 2012