Long and Bumpy Road to 3G Car
By Steve Wallage, Tue Jul 30 00:00:00 GMT 2002

Cars appear an ideal application for mobile and 3G services. Yet, history is not promising...

Using wireless technologies, and particularly 3G, would appear to offer limitless opportunities to car manufacturers. Just look at some of the statistics. In the US, it is estimated that around 70% of cellular minutes are used in cars.

Car-drivers have an absolute need for real-time information and navigational aids. Much of the journey is 'idle time' - ideal for many mobile applications. Safety and security are also key, and were the killer applications in a study of 20,000 Japanese drivers for Nikkei Business Publications. Specific applications included finding missing cars and requesting emergency assistance.

The automotive industry is also busy migrating towards electronics. According to Gerhard Hettich of Daimler Chrysler, "Today the added value of electronics is becoming the most important part for a vehicle manufacturer."

Yet, automotive telematics the merger of telecoms and infomatics has had a distinctly turbulent introduction. Despite, a host of new announcements and alliances such as the recent unveiling of a Mercedes S-class car fitted with a UMTS system - the markets remains very embryonic.

Not So Fast

The 'grand-daddy' of the industry is OnStar. It was launched in the US in 1996 by General Motors. Based on analog cellular and GPS, it offers a variety of navigational and informational services although its focus is clearly on safety and security. It currently has more than 2.5m subscribers and is available in 36 out of 54 General Motors models plus selected Lexus, Subaru and Audi models.

Yet, some competitors claim that only two-thirds of OnStar-equipped vehicles are ever activated despite the fact that the service is free for one year. Deutsche Bank estimates the second-year renewal rates at a pitiful 13%.

Ford's venture in the area was Wingcast, a joint venture with Qualcomm. The 18-month old venture never brought a product to market and has now been ignominiously canned. Ford is still officially re-thinking its telematics strategy, although it has worked with Vodafone to offer telematics functionality on luxury models in the UK and Germany.

The bottom line is that consumer demand for telematics is still unproven. Despite the obvious interest in safety features, consumers are reluctant to pay for something they hope they will never have to use. Automotive manufacturers are currently looking to cut costs rather than invest in unproven areas. There are also a number of other obstacles such as ownership of the customer, terminals, standards and entry price.

Goodies on the Move

So where does the market go from here. Wingcast and OnStar were based on analog cellular. The market starts to look much more interesting in a world of Bluetooth, WLAN and 3G. Here, a lot of alliances and interesting partnerships are being formed.

DaimlerChrysler has now unveiled its in-car 3G system which offers average data transmission speeds of 128kbit/s from a moving vehicle. It offers services such as music and video downloads, video telephony and an off-board navigation system which can transmit maps, directions and pictures from traffic cameras to drivers. Partners include Siemens, Sun Microsystems, T-Mobile, Jentro and MBDS/Nice University Sophia Antipolis. Interestingly, the company is not just targetting the affluent consumer but businesses which can install the system in the cars of travelling employees.

Unsurprisingly, much of the innovation is coming from Japan and Korea. KDDI of Japan, which counts Toyota as a major stakeholder, has been working with Cisco to offer WLAN services to its 3G customers. The system involves an in-car LAN system with a PC and an IP camera. There will certainly be demand for WLAN hotspots in areas such as motorway service stations, although such offerings should be considered as a complementary, rather than substitutive, service for cellular systems.

At the Tokyo car show in May, Toyota displayed a service, called G-BOOK, designed to let users download contents on networks and to play them over the vehicle-exclusive terminal. Content to be provided include real-time traffic information, shopping and restaurant information, entertainment information such as music and karaoke pieces, games, and news. The service will be available later in 2002. There are two ways to download content. Users can use wireless communication that uses the bandwidth allotted for mobile phone service or can download information by inserting a SD memory card into a terminal located at convenience stores by KDDI.

NTT DoCoMo has been working with Nissan for a number of years on telematics. It plans to launch a service in 2003 providing a console ready to guide the driver, provide customized information and replace the radio, directly downloading desired music from Internet. Nissan's new telematics service, called CarWings, will be available with its economy, rather than just luxury, models.

Bluetooth proponents have also seen the car as another market for the technology. There is a Bluetooth Car Working Group, which has designed 'Hands-Free profile' specifications for a hands-free phone application using Bluetooth. Later in 2002, Chrysler will begin offering a Bluetooth system called UConnect for $299 plus installation.

As well as other mobile vendors and operators interested in this market, Microsoft also aims to be a major player. Its technology is used in 12 car models from five different manufacturers. It has also developed a Car.NET architecture, as a component of its .NET platform, and its Windows CE platform at the forefront of telematics.

When Will Demand Take Off?

Despite all the alliances, car manufacturers are still quite cautious on future telematics and the arrival of the 3G car. According to Hettich of Daimler Chrysler, "safety and reliability are key issues in the automotive industry." The car industry is very wary of installing new systems until it knows they work, and will not impair safety. It is also very wary of adding additional costs to its customers.

Optimists believe that 3G services and additional functionality will entice customers. For example, Bob McKenzie, general manager of the Automotive Business Unit at Microsoft believes that, "once consumers become accustomed to telematics products and services in the car, opportunities will soar."

However, although researchers have been criticized for previously over-hyping the technology, they are actually fairly cautious. The Telematics Research Group believes that only 5.1% of cars worldwide will be using telematics in 2007. For the US, the figure will be 12.4%. The figures are lowered by the long replacement cycles for cars.

According to Telematics Research Group, by 2007, 42% of cars in the US will be sold with telematics and, by 2010, 81% of all cars sold. The Strategis Group is more confident, predicting that 49% of US car will be sold with telematics by 2005. The Nomura Research Institute predicts that 22m Japanese cars will have telematics by 2006, putting it just ahead of the US.

The 3G Car

Lots of trials are taking place in telematics, and the 3G car will become a reality as the services are deployed. Bluetooth will be used increasingly as a complement for cellular services in cars. Japan and Korea look set to lead the market, with Europe lagging behind partly due to the public transportation system and higher car costs making consumers more reluctant to buy in-car services.

On the positive side, some of the standards issues seem to be resolving themselves with the formation of groups such as Telematics Suppliers Consortium (TSC), and the Automotive Multimedia Interface Collaboration (AMIC). There may be less competition between the car and mobile industries, as the automotive vendors realize that they need each other and that they need to avoid being bypassed by mobile services directly aimed at motorists. However, the car manufacturers are unwilling to lose any of their branding power.

On the negative side, the car manufacturers are as risk-averse as any telecoms operator, and services will tend to be restricted to the high-end of the car market.

The 3G car will be there just not for a long while for most of us.

Steve Wallage works and writes for the451. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications.