In 2003, when Wal-Mart announced it would require all of its suppliers to use radio frequency identification, the telecommunications and IT worlds went into a tizzy. It's not that RFID was a brand new technology. In fact, the technology has been used for more than a decade in several industries.

Heavyweight RFID chips have been used in manufacturing to track goods through the assembly line. RFID chips form the backbone of automated freeway toll systems and many public transit fare cards. More recently, the technology has gone into the commercial sector for automatic payment at gas stations and fast-food restaurants.

What was unique about Wal-Mart's plans was not just the sheer scope of its operations — as the world's largest retailer, its supply chain accounts for millions of shipments and billions of individual products sold. Wal-Mart blew open the gates of RFID because the wireless supply-chain system it detailed would require an open system standardized across thousands of suppliers.

Almost all of the RFID deployments of the past used completely closed systems. The RFID chips of an automaker are designed only to be read by that automaker's RFID readers. A fare or toll card from an Illinois toll road won't work on a New York turnpike. And even the much more versatile key chain payment devices are only designed to work for a specific retailer. In fact, for the sake of security and competition, all of those above-mentioned companies or organizations want to keep their methods proprietary.

For Wal-Mart, however, a common technology and standardized coding are critical. The pallets and boxes it's tracking must be handled by numerous hands and processed through several places before they are unpacked onto the shelves. A box of shampoo has to be read not only by the scanner on the plant's floor, but by the shipping company that transports it, the warehouse that stores it and finally by Wal-Mart itself. And as other retailing giants like Target announce their own RFID plans, those same manufacturers must ensure that the same methodology works for their other partners.

The enormous scope of such a venture requires coordination among thousands of individual companies, all of which are effectively sharing data. So just as Wal-Mart's requirement to RFID has set off a chain reaction among retailers, it has created a similar flurry of activity among the vendors supplying the solution. Specialty RFID equipment-makers have found themselves joined by Cisco Systems. On the networking side, IBM and Accenture are throwing extensive resources into the sector. But there has to be a network to tie all these elements together. This fall, global telecom giant AT&T became the first carrier to announce its plans to take on RFID.

AT&T is planning a wide-sweeping RFID trial in the beginning of next year, the first such service initiated by a U.S. telecom operator. The 90-day trial will involve a half-dozen customers, ranging from the retail and financial sectors to manufacturing and possibly even a government office, said Eric Shepcaro, AT&T vice president of business strategy and development.

The trial, Shepcaro said, will focus on bringing together all the diverse elements of a fully integrated open-system RFID solution: from procuring the radio tags on the packages and the scanners that read them to the network middleware and hardware handling the traffic and ultimately the network connectivity and data centers that will store and pass that information down the supply chain.

“It's not just pallets and cases,” Shepcaro said. “We're looking to supply a complete managed solution that touches every aspect: security, quality of service, bandwidth requirements.” AT&T is bringing to the table an overall assessment of how RFID will work in a customer's supply chain, making a recommendation and then providing that solution, he added.

AT&T is creating a certification program to bring several vendor partners to supply the on-site equipment, RFID tags and middleware to make the solution run. While AT&T will act as the integrator, either procuring equipment or recommending vendors to the trial's customers, the operator is aiming to keep the critical communications and connectivity aspects of the solution under its own wing. It brings its global multi-protocol label switching (MPLS) network to the table to transport the enormous amounts of data traffic a robust RFID network would generate. And it has a worldwide network of 28 data centers on which that data would reside.

Medium-sized companies don't have the capital to invest in the infrastructure to manage and store the vast amounts of data a new RFID supply chain would require, Shepcaro said. And while larger enterprises do have the capital to buy that infrastructure, Shepcaro added, they still need the connectivity and expertise a company like AT&T can bring.

“We look to be the overall integrator,” Shepcaro said. “If a customer wants to go and get their own tags and readers, that's fine. We'll work with whichever scenario. There has to be a flexibility in what we offer.”

RFID technology reduced down to is essence is simply a smart label technology. Instead of a barcode label, RFID uses an embedded inlay containing a radio chip and antenna emitting an extremely low-power signal, which can be read by a nearby scanner. Instead of just a product code naming the product in the pallet or box, however, that RFID chip can contain a wealth of information: where it is headed, where it has been, the exact time it visited each of those locations and even whether a shipment has been divided up in transit.

These capabilities are nothing new — they've been used in vertical industries for years — but with the creation of open RFID systems, the technology has had to go through some significant changes. In order to create an open system, you have to have conformance of frequencies and standardization of protocols, said Bill Arnold, chief strategist for Omron RFID, a Japanese vendor now moving into the U.S. market.

On the frequency side, RFID has run the gamut of the spectral charts, ranging from the Industrial Scientific Medical (ISM) bands spanning three spectrum subsets in the 900 MHz, 2.4 GHz and 5.8 GHz bands to ultra-high frequency bands in 800 MHz and even dedicated spectrum in the 13.56 GHz range. On the protocols front, a global standard is necessary to make electronic product codes and accompanying data transparent across the public network. If every company is using proprietary methods and protocols to track their shipments then there's no way of moving RFID beyond the factory or warehouse floor, Arnold said.

Although international standardization is still up in the air, different governments have started settling on specific bands. As for protocol standards, much of the industry has gotten behind the banner EPCglobal, which has created a universal electronic product code network enabling that transparency over the supply chain. The biggest factor in pushing that standardization, however, hasn't been regulatory bodies — it has been the customers. Arnold said without the pressure of the major retailers, the evolution from closed to open systems wouldn't have happened.

“A major player had to make a mandate,” Arnold said. “That big retailer was Wal-Mart, with Target right behind. They're not just requesting; they're requiring.”

Wal-Mart and Target aren't just pushing RFID into the mainstream, they're demanding standardization across their supply chains. In October, both of those companies said they would share product code data between them, meaning that manufacturers supplying both Target and Wal-Mart don't have to create separate RFID systems for their two biggest clients. A box of shampoo is tagged as a box of shampoo, regardless of which chain store sells it.

Of course, this kind of transparency creates problems of its own, the biggest one being security. The beauty of a closed-loop system is its opacity. Data remains internal, and even if a competitor could access those tags, there's no way it could read the proprietary information stored within. With standard protocols, however, everyone with an RFID reader has the ability to access your supply-chain information. Security has to be established as a mechanism on the network. That's where AT&T feels it has its edge — in the management of data across the network — but AT&T isn't the only company out there entertaining the role of data integrator.

Although AT&T has been making a lot of noise about RFID in the last few months, IBM has been clamoring about the technology for more than a year. What's more, IBM has some experience in the business, supplying back-end systems and integration for closed-loop enterprise systems for years.

AT&T broaching the RFID market certainly does add credibility to RFID as a growing industry, said Ann Breidenbach, director of IBM sensor and actuator solutions management and strategy. AT&T supplies the global network necessary for any large-scale RFID deployment, but IBM for decades has been providing the core IT business solutions and integration that have been running these companies' supply chains, Breidenbach said.

“Regardless of whether it's closed-loop or open system, you need a company like IBM in both cases,” Breidenbach said. “In both cases they have to integrate RFID into their back-end systems.”

Although IBM definitely has the insight into the core IT systems of these companies, it doesn't necessarily have an enormous advantage over AT&T and other carriers getting into the RFID space, said Mike Liard, RFID program director for research group VDC.

RFID is a highly fragmented industry right now with a long list of disparate technology and middleware vendors and complexities that no single integration company can claim to grasp, Liard said. But consolidation is occurring as vendors swallow each other up. The retailers are selecting their preferred vendors, further narrowing the list. And the IBMs, Accentures and AT&Ts are forming partnerships and building their ecosystems at a rapid clip, Liard said. If IBM has one advantage over AT&T now, Liard said, it has been its visibility in the market, something AT&T could change if it attacks the market with gusto.

“IBM has spent a lot of time talking about RFID, establishing itself in the industry,” Liard said. “For AT&T, how much it talks up RFID in the next year could be the determining factor. There's an opportunity for them to be a thought leader in this technology.”

AT&T seems to have the same idea. Though it is technically only launching a trial, Shepcaro said AT&T doesn't plan on dallying once the 90 days are up. The trial isn't to determine whether or not AT&T will launch an RFID solution but rather to lock in the bolts of its solution before making it fully commercial.

In fact, Shepcaro and the rest of AT&T are talking about RFID far beyond the limited scope of the trial. From their perspective, RFID is just one element of a larger trend that is threading its way through all other sectors of telecom, IT and the consumer electronics industries. Everything from cell phones to gaming consoles has network data connections. It's no stretch to imagine that one day something as common as a bottle of shampoo, a carton of milk or even the family dog might have a presence on the global data grid.

“As we look at the landscape for the next several years, we believe all objects will be networked,” Shepcaro said. “Everything will have a relation to the network. We believe that's what the future holds, and we also believe that only the service providers with the broadest reach will be able to support it.”