By almost all accounts, the market for in-vehicle wireless communications and information services-called telematics-is going to explode in the next few years.
Studies by consulting firms Strategis Group and Allied Business Intelligence predict more than 1.2 million automobiles will be equipped with telematics devices by 2003, with sales totaling $5.1 billion.
Before that can happen, however, technical improvements are needed in telematics hardware and more demand must be created in the consumer marketplace. On both fronts, however, don’t look to wireless carriers to lend much of a hand, despite the fact their networks will carry telematics services.
On the surface, it seems like a no-brainer. Telematics services combine wireless voice, data and global positioning system technologies to provide drivers and passengers with location-specific security, information and communication services through a centralized service center. The main applications include automatic collision notification, emergency response, roadside assistance and stolen vehicle notification.
But despite the pioneering of Ford, Nissan, Mercedes, BMW, Renault and others, telematics solutions have been slow to take off. Research suggests consumers are highly satisfied with telematics services when included as a standard feature in a car, but are not willing to pay extra for it as an after-market device.
“The real Achilles heel is that telematics systems are hard to install,” said the Strategis Group’s Stephan Beckert, who follows the telematics industry. “There’s no effort to make a standardized consumer plug-and-play product for cars … There’s no easy entry point for carriers, no easy way to distribute the product.”
The difficulty, he said, lies in the many firewalls placed between in-vehicle mechanics to ensure the radio system doesn’t interfere with the air conditioning or the lights don’t interfere with the locks. Because each system is separate, it is difficult to design a device that can receive input from all of them, Beckert said.
Existing systems take up to four hours to install and add significantly to the vehicle’s price, Beckert said. However, auto manufacturers are building cars with telematics services included as a standardized function.
Perhaps these technical difficulties are responsible for lack of awareness among the consumer market. Car consumers have demanded auto manufacturers make safer cars, but are relatively unaware of telematics’ advantages in that space. As telematics systems become easier to install, the auto industry likely will ramp up its promotional and education campaigns.
“The application that will cause the industry to grow is just plain safety,” Beckert said. “If you’re in an accident, you want voice. You want to tell someone what happened and hear that help is on the way.”
Although some wireless carriers like Omnipoint Communications Inc. and GTE Wireless have impressed analysts with their interest in telematics to date, carriers haven’t been that aggressive in deploying value-added services. With millions of new phone users added every year and growth rates of about 20 percent, it is understandable why wireless carriers are not overly concerned with telematics. Only about 100,000 cars are on the road today with the capability.
“They’re just too busy. It’s too easy to just sign up new subscribers than to pay attention to value-added services,” Beckert said.
But this low-hanging fruit will soon thin out, and then carriers will look to telematics and other value-added services to continue the propagation of their networks. But by the time wireless carriers look to telematics as a means of doing so, the market could be controlled by the auto industry.
However, Gary Wallace, executive director of external affairs at ATX Technologies Inc.-which operates a call center that provides many of these telematics services-said wireless carriers will not be out of the telematics loop completely.
“I don’t think wireless carriers are missing the boat, but now is the time they need to start looking at it,” he said.”I think the automakers are creating a market for (wireless carriers).”
As telematics become more popular in cars, he explained, customers will grow accustomed to location-based services and begin demanding them in their phones as well. Just as a driver will use a telematics system to get directions when lost, a pedestrian may want the same type of service on a handset.
“The automakers are three to five years ahead of the wireless carriers,” Wallace said. “It is the auto industry that is leading the wireless industry to see the advantages of telematics.”
For example, one of ATX’s customers is Garmin International, whose NavTalk phone is a GPS-enabled device used by outdoorsmen. One button connects user to ATX’s emergency call center for back-country assistance.
Once carriers decide to add location-based services on handsets, it will likely be an easy transition, as the world’s leading wireless vendors are already deeply involved in the telematics space.
Motorola Inc. formed its Telematics Information Systems unit last October, combining the firm’s wireless communications and GPS strengths to better focus on automobile uses.
“Motorola has been instrumental,” Wallace said. “They helped preview the whole category. They’ll play a bigger role in transitioning to wireless devices.”
Nokia Corp. and ATX announced plans to develop wireless-based emergency, navigational and information products and services for the automotive industry and consumers in the United States. Nokia’s Smart Traffic Products unit has been developing mobile communications and information solutions for cars in Europe based on Global System for Mobile communications and GPS technologies.
Ericsson Mobile Communications AB and Mannesmann VDO AG also recently announced a strategic alliance to cooperate in developing telematics systems and applications. The solution will bundle in-car navigation, communication, telematics and entertainment, the companies said. One possible application is to deliver traffic information and Internet services over Wireless Application Protocol networks, of which Ericsson is a major backer.
