De Facto Global Standard for Active RFID is Emerging

Dec 07, 2006This article was originally published by RFID Update.

December 7, 2006—The ISO standard for active RFID, ISO 18000-7, has been gaining traction in recent months, and industry analysts think it will likely become the de facto global standard for tracking shipping containers as they are transported around the world.

Last month, Savi Technology announced that the China State Radio Regulation Committee officially approved the use of its active RFID products throughout China. In so doing, the Chinese government essentially authorized the use of ISO 18000-7, since Savi's active RFID products are all compliant with the standard. In fact, the standard relies heavily on intellectual property developed and owned by Savi. China was following in the footsteps of numerous other countries around the world, including Australia, Korea, Taiwan, and Singapore.

Three weeks ago another boon to ISO 18000-7 came in the form of a Request for Information (RFI) from the US Department of Defense seeking commercial availability for active RFID equipment that complies with the standard. The DoD is considering a follow-on competitive contract to the $425 million RFID II contract it has with Savi. According to a research note released last week by ARC Advisory Group's Adrian Gonzalez, the RFI represents both a tacit endorsement of the standard by the DoD as well as a hopeful sign that another multimillion dollar contract is on the way.

Such a contract will increase competition among providers of ISO 18000-7 technology, a market that is virtually monopolized by Savi at the moment. Indeed, it is the DoD's intent to diversify away from its sole reliance on Savi for active RFID. "The Government is considering a follow-on competitive contract ... to include alternate sources of supply for the specified Active RFID equipment," reads the RFI. By throwing its weight behind the standard, the DoD will encourage vendors to do the same, hopefully igniting a virtuous cycle of ISO 18000-7 market expansion as products proliferate and prices fall. "This approach will enable the Government to competitively procure the specified active RFID products and associated services to foster competition for this technology."

At first glance, this might seem like bad news for Savi as it threatens the company's undisputed market dominance. However, the aforementioned intellectual property baked into ISO 18000-7 and owned by Savi means that the company is a sort of gatekeeper to the standard: to be compliant with ISO 18000-7, a product must incorporate Savi's IP. Thus, as the market grows, so too does the licensing revenue stream back to Savi. The company is proactively embracing this opportunity; in August it launched a Quick Start program that offers beneficial licensing terms to vendors who join before the end of the year.