(Agencies)
Updated: 2008-01-27 15:50

In 2003, the US Department of Defense and Wal-Mart gave RFID a mammoth push, mandating that suppliers radio tag all crates and cartons. To that point, the cost of tags had simply been too high to make tagging pallets - let alone individual items - viable. In 1999, passive tags cost nearly $2 apiece.

Since then, rising demand and production of microchips - along with technological advances - have driven tag prices down to a range of 7 to 15 cents. At that price, the technology is "well-suited at a case and pallet level," says Mullen, of the industry group AIM Global.

John Simley, a spokesman for Wal-Mart, says tracking products in real-time helps ensure product freshness and lowers the chances that items will be out of stock. By reducing loss and waste in the supply chain, RFID "allows us to keep our prices that much lower."

Katherine Albrecht, founder of CASPIAN, an anti-RFID group, says, "Nobody cares about radio tags on crates and pallets. But if we don't keep RFID off of individual consumer items, our stores will one day turn into retail 'zoos' where the customer is always on exhibit."

So, how long will it be before you find an RFID tag in your underwear? The industry isn't saying, but some analysts speculate that within a decade tag costs may dip below a penny, the threshold at which nearly everything could be chipped.

To businesses slammed by counterfeiters - pharmaceuticals, for one - that's not a bad thing. Sales of fake drugs cost drug makers an estimated $46 billion a year. In 2004, the US Food and Drug Administration recommended that RFID be incorporated throughout the supply chain as a way of making sure consumers get authentic drugs.

In the United States, Pfizer has already begun chipping all 30- and 100-count bottles of Viagra, one of the most counterfeited drugs.

Chips could be embedded in other controlled or potentially dangerous items such as firearms and explosives, to make them easier to track. This was mentioned in IBM's patent documents.

Still, the idea that tiny radio chips might be in their socks and shoes doesn't sit well with Americans. At least, that's what Fleishman-Hillard Inc., a public-relations firm in St. Louis, found in 2001 when it surveyed 317 consumers for the industry.

Seventy-eight percent of those queried reacted negatively to RFID when privacy was raised. "More than half claimed to be extremely or very concerned," the report said, noting that the term "Big Brother" was "used in 15 separate cases to describe the technology."

It also found that people bridled at the idea of having "Smart Tags" in their homes. One surveyed person remarked: "Where money is to be made the privacy of the individual will be compromised."

In 2002, Fleishman-Hillard produced another report for the industry that counseled RFID makers to "convey (the) inevitability of technology," and to develop a plan to "neutralize the opposition," by adopting friendlier names for radio tags such as "Bar Code II" and "Green Tag."

And in a 2003 report, Helen Duce, the industry's trade group director in Europe, wrote that "the lack of clear benefits to consumers could present a problem in the 'real world,'" particularly if privacy issues were stirred by "negative press coverage."

(Though the reports were marked "Confidential," they were later found archived on an industry trade group's Web site.)

The Duce report's recommendations: Tell consumers that RFID is regulated, that RFID is just a new and improved bar code, and that retailers will announce when an item is radio tagged, and deactivate the tags at check-out upon a customer's request.

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