Telematics and “Connected Vehicles”

Mike Peterson (LFM ’94)

Strategy Planning Manager
OnStar
[email protected]
Telematics and Connected Vehicles

• Definition of Telematics
• Drivers
• Infrastructure
• Current & Future Offerings
• Challenges & Opportunities

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Definition of Telematics and “Connected Vehicle”

• A two-way connection to and from a vehicle for

data and information transfer

• Telematics is typically not:

– Onboard autonomous navigation systems
– AM/FM radio

• A telematics system consists of:

– Vehicle (cell phone, GPS, vehicle data)
– Wireless interface
– Back-office systems
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Potential Components of a Telematics System

WIRELESS Satellite / Point – to – Multi-Point

INTERFACE Microwave
CELLULAR WIRELESS
CONNECTIVITY

Fiber / Cable

ENABLED VEHICLE

CELL TOWERS

Call
Application Center
Management

BACK-OFFICE
Content SYSTEMS
Providers

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Source: Erik Bue

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Markets for Telematics

• Vehicle types
– Personal vehicles: cars, trucks
– Boats, motorcycles
– Work vehicles: mail trucks, semis, Border Patrol, Coast
Guard, ambulances
• Vehicle owners
– Personal
– Fleets
– Military

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Value Propositions for Telematics
• To consumers
– Safety & security
– Time savings (navigation)
– Increased productivity (in vehicle)
• To fleet provider
– Optimization of assets (asset tracking, performance
monitoring)
• To business
– Additional data from vehicles (warranty, usage)
– Increased vehicle sales (or “price of survival”)
• To government
– Improved infrastructure management (traffic, tolls)
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There is a significant market opportunity for
telematics, if done right.
• Wireless use is growing
– US wireless industry is $80B (WSJ 7/28/03)
– 30 M US households will employ data networks by end of 2007 (Park Associates)
– Intel’s Otellini predicts that 1.5 B PC’s will have wired or wireless broadband
connections by 2010
– Cable broadband services posting operating profits of ~60% (CIBC)

• Consumers want to be more productive

– Consumers pay $15-100/mth for cell phones & internet service providers
– Average US citizen spends 541 hrs/yr driving in vehicles (1.5 hrs/day)
(NTPS)
– 97 M people in the US spend at least 37 minutes commuting in their car
every day.

• Automotive industry is highly competitive; features and services which

provide a lead are crucial to success

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Source: Erik Bue

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Predictions: Telematics-Enabled Auto Sales
12

10

8
USA
6
W. Europe
4 Japan

0
2002 2004 2007 2010

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Prediction: Telematics-Enabled Autos In-Use
45
40
35
30
25 USA
20 W. Europe
15 Japan

10
5
0
2002 2004 2007 2010
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Current Telematics Services - Consumers

 Safety  Remote Vehicle

 Air Bag Deployment Operation
Notification  Remote Unlock
 Seat Belt Tension  Remote Horn/Lights
Notification
 Emergency Assistance
 Roadside Assistance  Information Services
 Navigation Assistance
 Points-of-Interest
 Security
 Vehicle User Info
 Automatic Theft Notification
 Convenience Services
 Theft Tracking
 Internet Based Services
 GeoFencing

 Vehicle Status
 Remote Diagnostics
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Additional Telematics Services - Fleets
 Fleet Performance
 Maintenance Management

 Fleet Tracking
 Asset Management
 Vehicle Information
 Usage Monitoring
 Vehicle Tracking

 Fleet Utilization
 Customer Processing
 Paperless Manifest
 User log book
 Instant Messaging
 Job Dispatching

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Examples: OEM telematics offerings

• Mercedes (Tele Aid): $240/yr + airtime to call center

$75/yr route support/traffic package
$1300 optional integrated phone
$400 voice recognition option for phone
 
• Jaguar (JaguarNet): $2250 + airtime
• Includes portable phone and voice-activated controls
 
• BMW (Assist): $120/yr
$1290 phone req’d for telematics
$1800 navigation system req’d for telematics
 
• Volvo (On Call Plus): $240/yr
• Does not offer route support or remote diagnostics

• OnStar: $200/yr for safety & security services (airtime included)

$400/yr to include information & navigation services
•

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OEM Telematics Players – Offerings over Time (North America)

Who’s missing:

1996 1997 1998 1999 2000 2001 2002 2003

CY 13
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Many opportunities exist in the future to enhance
current services and create new ones.
• Data services
– Software downloads
– Content downloads
• Enhanced vehicle diagnosis & repair
• Expansion into other dimensions of vehicle lifecycle
(manufacturing, vehicle development, design)

• Key enablers for future services/growth

– Communications bandwidth
– Coverage (wireless)
– Vehicle penetration
– Vehicle integration (messaging)
– Reduced costs (hardware, service)
– Standards (Bluetooth, vehicle messaging)

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There are many “pieces of the puzzle” which create
value in telematics.
• Marketing of services (education of consumers)
• Integration of services (menu structures)
• Integration of equipment into vehicle
(human/machine interface)
• Connection of vehicles to content (wireless)
• Conversion of data into services (back office)
• Content providers (vehicle data, entertainment)

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Competition among service providers is seldom one-
to-one; each player has a slightly different offering.
• OEM-owned telematics service providers (OnStar)
• Aftermarket devices (LoJack, NetworkCar, Mobile
Guardian)
• Independent telematics providers – retail (ATX, Cross
Country)
• Independent telematics providers – fleet (Qualcomm
OmniTRACS, @Road)
• Voice portals (TellMe, BeVocal, Internet Speech, AOL By
Phone)
• Cell phone voice services (Verizon, Sprint)
• Auto club services (AAA)

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In addition, each piece of the telematics value chain
has its own set of players.
• Content
– TeleAtlas, NavTech, MetroNetworks
– CNN, Disney, ESPN
• Operating systems (Microsoft, Java, Linux)
• Vehicle hardware (Delphi, Nokia, Samsung)
• Voice recognition (Nuance, Speechworks, IBM)
• Call centers (EDS, GE, Cross Country)
• Business Operations (Digitas, Acxiom, Sigma)

Issues in partner selection:

• Volume capability
• Support capability (established firm?)
• Exclusivity
• Flexibility

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Finally, there are a variety of wireless technologies
that can be applied to telematics.
• Cell (Analog, CDMA, GSM; voice, data/SMS)
• Short-range communications (Bluetooth)
• Medium-range communications (802.11)
• Satellite communications (Boeing Thuraya, XM Radio,
Sirius)

Issues in technology selection:

• Level of ubiquity
• Reliability of technology
• Upgradability
• Level of control over provider (multiple sourcing)

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Challenges – Hardware/Technology
• “Clockspeed” mismatch
– Telematics services (1-6 months)
– Consumer electronics (6-18 months)
– Vehicle development process (3-5 years)
– Vehicle ownership lifecycle (6-15 years)
• Shifts in technology (analog  digital)
• Technology application (client vs. server)

Challenges – Societal
• Government regulation (FCC – E911)
• Interface with emergency service providers

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Challenges – Strategic/Financial

• High cost of infrastructure

– Investment = control
• Involvement of multiple partners
• Packaging of services
– Wide variety of customer needs/wants
– Consumer confusion
• Selection of business model
– Upfront equipment sales
– Service subscription
– Grow critical market mass
– Operating efficiencies
– Licensing/royalties

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Examples of Business Models “In Play”

• i-Mode DoCoMo: Define platform for 3rd party software development:

monthly revenue from: basic service, data traffic and fee from 3rd party
service providers
• Microsoft: Create the OS for vehicles that becomes the standard that all
future consumer telematics applications must be built off of
• OnStar: Seed network through factory-installation onboard vehicles
purchases
• Cell Co’s: Compete based on lowest price to service quality ratio
• TiVo: Charge monthly service fee upfront at a discount
• Palm/PDA: Define & market hardware & OS; nurture application
developers. Make alliances with Cell Co’s.
• Dell: Least expensive, custom-assembled modular systems based on
commodity components
• Leverage COTS Components: eg Apple iPod: Over 1M people have
been willing to pay $300-500 for the 5-40GB drives.

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Source: Erik Bue

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Parting Thoughts

• Telematics represents a significant but complicated

opportunity.

• There are many ways to create value in telematics,

many of which have yet to be fully exploited.

• The telematics “industry” is a network of partners

across a variety of disciplines.

• The “winners” in telematics, as well as the ultimate

potential of the industry, is yet to be determined.

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Open Questions (for discussion)

• How does/could your business participate in this

space?

• What needs to happen to unlock the full potential of

telematics?

• What service domains will be most important in the

future?

• What business model(s) do you think will be most

successful?

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Appendix – OnStar Overview
OnStar’s Beginnings

1996 2002-3
Employees 18 436
Subscribers 1 2M+
Hardware Phone 5th Generation
Services 8 15
Database 600K 7M
Advisor Seats 6 1,000+
Distribution 1,500 Dealers Factory
Brand Recognition 1% 90%

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 Portfolio of Core OnStar Services

Safe & Sound Directions & Luxury & Leisure

Connections
• Automatic All Directions &
Notification of Air All Safe & Sound Connections services
Bag Deployment services plus: plus:
• Emergency Services • Route • Personal Concierge
Support/Directions
• Roadside Assistance • OnStar MED-NET
• Information/
• Stolen Vehicle
Convenience Services
Location
• RideAssist
• AccidentAssist
• Remote Door Unlock
• Remote Diagnostics
• Online Concierge

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OnStar Personal Calling

• Embedded in vehicle
• Hands-free, voice-activated interface
• Pre-paid minutes
• No roaming, no long distance charges
• Nationwide wireless network coverage

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 OnStar Virtual Advisor

Personalized web-based information

delivered to the vehicle using hands-
free, voice-activated interface

Stock Quotes E-mail

– Fidelity Investments Sports Scores/News
News – The Sporting News Radio
– Wall Street Journal – ESPN.com
– ABCNEWS.com
Weather
– CNNRadio
– Weather.com
Entertainment
– Disney.com Traffic
– Metro Networks/Tele Atlas

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XM Satellite Radio

XM
Satellites

• Two Geo-stationary
Rock Roll satellites
• 1,700 terrestrial repeaters

Terrestrial • In-vehicle equipment

Repeaters
­ Receiver
­ Antenna
­ Radio head unit

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