Ready to Rumble
By Peggy Anne Salz, Mon Apr 22 00:00:00 GMT 2002

Automobile manufacturers, telematics start-ups and mobile operators are jockeying for position in the race to enable the wireless, wired car. But a seismic shift in the telematics model may mean company.

Carmakers have been tinkering on the “connected car” concept since the early 1980s. Only back then there wasn’t much to connect it to. But with improvements such as always-on GPRS, advances in voice recognition and the introduction of laws requiring drivers to use a hands-free kit, telematics is starting to pick up speed. Rather than focus exclusively on delivering services such as directions and traffic information, the industry has correctly recognized that “push” is not where the money is.

Instead, the “pull” aspect of telematics will allow car companies to wirelessly gather data from the vehicles, paving the way for a variety of exciting B2B models. For example, insurance companies could introduce pay-as-you go coverage schemes and car manufacturers could track their cars from the time they leave the assembly line – edging out the dealer as the main customer contact in the CRM value chain. We may even end up saying goodbye to the wild moments when we dare to put the pedal to the metal. We won’t admit to speeding – beware, our cars might.

But not so fast. Before any of this happens the telematics industry has to resolve some complex issues: What are the industry standards? Who owns the vehicle data and who has the authority to sell it? What are the privacy issues associated with the collection of data that no one has ever bothered to gather? Who controls the customer relationship?

Despite the confusion, there is good reason for companies to move full-speed ahead. Forrester Research, for example, estimates that hardware, services and airtime charges in the US alone will soar from just over $3 billion this year to $20 billion by 2006.

A more sober market breakdown comes from Strategy Analytics in the UK. It argues that telematics will be a “systems-led market” across North America, Western Europe and Japan, with telematics service revenue set to reach only $2.1 billion in 2006. However, the market for telematics terminals, the myriad of devices that have a positioning or wireless network capability, will rocket to a $17.8 billion.

DoCoMo for motorists

Sensing a huge opportunity to create an industry standard for mobile telematics services and drive the development of vertical applications, NTT DoCoMo and Nissan have teamed up to develop a slate of multimedia services that can be accessed seamlessly both within the car and via mobile devices. To this end the companies will undertake a joint study into “the feasibility of a host of telematics services and business models” – with the promise to make their findings available to other service providers at the end of the year.

The plan is to roll out a series of advanced telematics services beginning in 2003. These will include location-based navigation services offering traffic information, weather reports, parking options and information on hotels, restaurants and other points of interest. Tailored location-based services such as downloadable digital maps of the local area with routes or places of interest highlighted will also be made available.

From 2004 onwards the companies will extend their reach to businesses including insurance companies and security firms anxious to get a share of the telematics pie. Other possible services include the use of dedicated local area networks to enable m-commerce, electronic toll collection and audio and video multimedia downloads. “Drivers and passengers will be able to enjoy the convenience of their own living room or office in their Nissan cars,” predicts Carlos Ghosn, Nissan chief executive.

Making way for the PDA

Indeed, the advent of “pull” services has the potential to put mobile device manufacturers -and the companies who support, develop and deliver to these devices – up a huge notch in the telematics value chain. “Because of their lifecycle properties, mobile devices can continually innovate and upgrade for the new telematics services in the pipeline. Fixed on-board (telematics) systems are just not this flexible,” notes Francois Truc, Vice President in the Global Automotive Practice of Booz Allen & Hamilton in the US. “The mobile phone and the PDA will inevitably be an integral component of the car’s telematics system.”

But don’t expect carmakers to beat a retreat. They have sexy brands, popular portals and no reason to let mobile carriers muscle in on the customer relationship. " Providing access to services such as personalized information, Java games and location-based requires us to open up our car technology to the carriers and the device manufacturers,” says Seshu Bhagavathula, responsible for Telematics Services at DaimlerChrysler’s Corporate E-Business division. DaimlerChrysler’s role in this, Bhagavathula says, is to brand the services, face the customer and lead the value chain. "Car companies won't give these (user-centric) services away. There will be co-branded efforts and portals, but the (carmaker's) name will always be at the top."

An illustration of how this could all come together is DaimlerChrysler’s PT Cruiser car, a one-off prototype customized by O2 and the CRM consultancy Detica. This all-singing all-dancing installation features Internet radio, email, remote working, streaming audio and video and, of course, satellite navigation, via a wide range of devices all linked together over a wireless network. These include a Motorola Timeport phone for connecting to GPRS, a Sony Vaio laptop, a Compaq iPAQ PDA, an Alpine multimedia system and Olympus video glasses that serve as a virtual monitor for downloadable backseat entertainment. Voice communication is also provided by an Ericsson T39 handset with a Bluetooth headset.

Filtered coffee in the front seat:

Vodafone, rather than be a pipe, is making a play for the role of services/content enabler. Its unique approach, up and running in the BMW 7 series and offered as an option in some Ford cars available in Germany and the UK, is to separate private telephony and car-related services by allowing access to both via a so-called Global SIM.

This SIM, which is embedded in the carmaker’s on-board technology when it leaves the assembly line, allows seamless access to driver assistance and remote diagnostic services. However, the customer can also access personalized information and entertainment services in the form of applets, which in the future he may download from the carmaker’s portal to his Java device, by inserting the same SIM into a smartphone or PDA.

This jives with the Vodafone future vision of a “filtered coffee model” for mobile access to both fun content and navigation applets. “It would be a bit like packing for the trip,” notes Michael Alger, Senior Technology Manager, Telematic Systems, at Vodafone Produktentwicklung GmbH in Munich. “You could configure your car from the desktop, downloading the maps and entertainment and whatever else you need.”

Within this model Vodafone would provide the access, hence enabling the services – and could even play the role of gatekeeper. “The user could chose content from a white list maintained by the party who operates the portal and download the navigation applets from some provider who offers this to the portal.” But there’s a catch. “If you would want to download a game it would have to be certified that it is safe and that you aren’t downloading a virus that could affect the car electronics. Vodafone might therefore find a role in the certification of applets as well.”

But isn’t this just another take on the walled garden approach where operators control customer access to content on the Net? Alger skirts the issue. “First you have to ask yourself, do you really want to surf all of the Internet from your car? I’m not so convinced this will be the model.” And where does the content on the white list come from? Predictably, that business model is “still under discussion.”

None of the above:

But time is a luxury this industry doesn’t have. Carmakers and carriers have to decide where the content has to come from – before the window of opportunity closes, leaving them both out in the cold. “Car companies and carriers are both in trouble and their traditional sources of revenues aren’t enough. They need to make money and telematics fits the bill,” notes Michael Jeltsch, a partner with Accenture in Germany responsible for telematics across Europe.

The way out of this dilemma is to partner or perish. Ford got the message. Last month it teamed up with PSA Peugeot Citroen and Renault-Nissan teamed up in a world-first joint venture to capitalize of the combined telematics capabilities of the three companies and “develop a shared European infrastructure. Expect to see more of the same as companies rethink their strategies and finally recognize that the new paradigm for this value chain is more of a value web.

And beware: this web includes more than just the usual suspects. Global Radio, headquartered in Luxembourg, is developing Europe’s first satellite digital audio broadcast system in 2005. The company, which aims to be the premier provider of personalized digital radio and broadcast telematics, plans to beam at least 60 customized channels to subscribers when it launches in 2005. The newcomer understandably unsettled wireless operators present at a recent telematics conference in Europe. It can, if it chooses, partner with carriers for a return channel – or it can increase its satellite capacity to by-pass operators altogether.

Another company to watch is Definiens, a Munich-based start-up that is developing a portable generic communications platform for car-to-car communications. This Napster-like approach to telematics makes each car a mobile node in a peer-to-peer telematics network making it possible for drivers to warn other drivers of traffic jams and provide dynamic route optimization without any middlemen. The cars, each outfitted with a special chip, can communicate data among themselves via free radio frequencies and completely independent of satellites.

And let’s not forget Microsoft. In January Microsoft quietly sealed a pact with Accenture to “accelerate” efforts to position its Car.NET architecture, a component of its .NET platform, and its Windows CE platform at the forefront of telematics. Microsoft, which could not only dominate the back-end, but also make a play in the content arena through its MSN, poses a serious threat to all the established players.

But the biggest challenge moving forward may be the end-customer. As standards emerge and consumers demand more choice in content and devices, then it’s a given that the close tie that bound the customer to the carmaker will unravel. Strong alliances with the right players can help carmakers defend that position. And they aren’t the only ones likely to gain. Carriers anxious to recoup some of the €250 million they’ll be sinking into next-gen networks should focus on partnerships to pick up traffic minutes, operate billing and back-office integration and develop offers for industries such as insurance just waiting to join the party.

As in all business models there are benefits and risks – but a failure to read the signposts now force companies to pay a heavier toll further down the road.

Peggy Anne Salz is a freelance who likes to go beyond the day-to-day developments in the mobile space to grapple with the toughest issue: where the industry is going.Her work has appeared in a number of publications including Time, Fortune and The Wall Street Journal Europe, as well as Communications Week International, where she is one of the editors.