"There are many business reasons to use RFID technology - supply-chain accountability, inventory management, ensuring product legitimacy - which is critically important in an era of counterfeit and pirated goods, especially in pharmaceuticals," said David Sampson, acting deputy secretary of commerce, speaking to a meeting of the U.S. Chamber of Commerce.

RFID is seen as a replacement to barcodes in many inventory and supply-chain tracking applications and as a tool for consumer-information gathering.

The technology allows an item carrying an RFID tag to be scanned quickly from a distance of up to several meters, doing away with the need to locate barcodes on items. Business leaders think RFID will enable them to receive real-time inventory updates and reduce the cost of excess stock.

"To be a best-run business, you have to use technology to leverage efficiency and growth, and RFID on the part of our customers is viewed as a major positive," said Bill McDermott, chief executive officer and president of SAP Americam, in Newtown Square, Pa., a business-software provider.

"Companies are viewing RFID as an opportunity," McDermott told United Press International. "There is $1.5 trillion in excess inventory in the United States. The carrying costs of that, despite having the lowest interest rates in years, are $300 billion."

RFID leaders have said the technology will grow as more companies realize cost savings and develop new applications.

"According to industry sources, the RFID market for related consulting, implementation and management is expected to reach between $2 billion and $4.2 billion by 2008," Sampson said. "In addition, as much as 30 percent of all capital goods will carry RFID tags by 2008."

Some groups worry, however, that the technology carries the potential for serious privacy and security violations - particularly when used on individual consumer items.

For example, privacy groups have called for a boycott of Gillette in the United Kingdom and Australia because the company used RFID tags to take pictures of customers removing their products from store shelves in an attempt to cut down on shoplifting.

McDermott told the conference attendees that for certain applications, Americans might be willing to trade a little bit of their privacy for convenience and speed.

"We have yet to find out whether RFID makes consumers' lives more convenient," said Katherine Albrecht, founder and president of CASPIAN - Consumers Against Privacy Invasion and Numbering - in Nashua, N.H.

"Finding consumer benefits for their products has been a primary challenge for the industry," Albrecht told UPI. "They haven't found any killer application to make consumers give up their privacy for added convenience."

She said the industry's main use of RFID technology is for supply-chain management rather than for tracking individual items or consumers. Nevertheless, she added, some of the wariness is understandable.

"They were really gung-ho about consumer applications for RFID and got stung by customer backlash," she explained. "Now that the industry has some real dollars to fund it, they are testing the waters, but they are doing it more on the periphery."

Business leaders at the meeting said they worried about government legislation involving either technology standardization of RFID or associated privacy issues.

"The guidelines will evolve as the technology evolves. We really don't know what the technology will look like in the marketplace in five or even three years, and regulations are very hard to change," said Elizabeth Board, executive director of the Public Policy Steering Committee at EPCglobal, an organization developing RFID standards.

"That is why I think industry self-regulation is really critical here."

McDermott agreed. "Because America is in the lead and strong on this technology," he said, "we should take the lead in having hearings on these matters now, but we should not over-legislate. We didn't over-legislate the Internet and look at what it is today. Maybe RFID is one of those enabling technologies that 10 years from now could lead to the next big wave of change in IT."

Albrecht did not concur, however. "The critical difference between the Internet and RFID is that RFID is a top-down technology that is being imposed on us," she said. "When you have a technology that is that powerful, it is inevitable that the guys with all the power will try to take it over."

CASPIAN has proposed legislation requiring all RFID-tagged products to bear a label making consumers aware of their presence.

Certain drawbacks to the technology itself also may slow its widespread adoption.

"I have some bad news," said Juergen Reinold, senior director of technology, advanced development, architecture, standards and intellectual property at Motorola Secure Asset Solutions in Schaumberg, Ill.

"RFID is based on (radio frequency, which) is a very beastly thing to control. It doesn't travel along a straight path like a laser, for example. It is subjected to interference, cancellation and reflection."

Because of those factors, RFID has a readability success rate of around 80 percent, but it needs to achieve 90 percent or better if it is to be used in one of its envisioned roles as a counterfeiting countermeasure.

Also, the per-unit price of RFID tags currently runs around $0.30, but experts think it must drop to $0.01 to $0.10 before the devices can used widely on individual consumer goods.

K.I. Marshall is an intern for UPI Science News.

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