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Ovum: The connected car: who is driving?
Jun 8, 2012 – Mike Sapien
Verizon has recently made a series of major announcements about its efforts in telematics, with a focus on connected cars. One of these announcements concerned its acquisition of Hughes Telematics, which indicates a strong and growing interest in the connected car market. Telcos such as Verizon, car manufacturers, M2M platform providers, device manufacturers, wireless operators, and various applications and infotainment service providers have all been chasing this market for a long time.
Automobile manufacturers lead many of the current deployments, and promote specific applications such as safety and customer service. The role of wireless operators, however, has been limited: they have a very hard time managing the complexity, detail, and flexibility required for connected car applications. As with many M2M applications, there are many different business models, and much fragmentation in the various solutions.
Although Verizon has stepped up its game in telematics, it is clear that there will be two primary mobile connections in the car: one from the manufacturer, and one from the end user. Operators will need to address these connections with different business models.
Auto manufacturers will require a connection for specific applications
During the past year, auto manufacturers, especially luxury manufacturers, have been promoting broader deployment of connected car programs. These programs have increased the demand for global coverage and centralized platforms to support global availability. Many of the basic features and services require lower bandwidth, but increase safety, improve customer service, meet regulatory requirements, or support maintenance programs for the car itself. Although many wireless operators have been participating in these programs, the global requirements and complexity tend to give M2M wireless aggregators the advantage. It is also clear that it is the auto manufacturers that will have the relationship with the owner of the car. Verizon has taken a step towards meeting some of the requirements of this sector with its acquisition of Hughes Telematics, but it still has challenges to address. These include providing global coverage, and integrating Hughes Telematics into its organization.
Drivers and passengers have their own agendas and connections
Separate from the auto manufacturer, end users (drivers and passengers) will have different use cases, application needs, and overall requirements for mobile services within the car. They will also prefer, in many cases, to bring their own devices. The end user will come into the car with an existing phone (typically a smartphone), carrier relationship, and mobile service plan that will need to be integrated into the car environment. They will have preferences and applications that they will want to extend to the car, and the car will need to accommodate their choice of device and services. For the optimum user experience the car should be able to adapt and leverage the mobile device and services of the end user. Most drivers will replace their mobile phone and carrier more frequently than replacing their car, which is another reason for the two connections to be separate and distinct.
The connected car market will eventually require an open model
Over time, the connected car market will require an open architecture business model. It must allow for the interoperation and exchange of cars, operators, and device types if it is to gain broader support from both the auto manufacturers and the end users. Drivers and passengers will want a choice of mobile device, and will expect to be able to integrate their device with their car’s features and services. The auto manufacturer may provide basic services and maintain the M2M ecosystem relationships, including with the operator, but ultimately end users will require an open model, and will also continue to shop for “after-market” alternatives. Such an after-market will include many of the infotainment services that are already offered on mobile devices today.
During the recent Verizon-Hughes Telematics briefing there was mention of an after-market offer, which may help Verizon get there faster than most. With its acquisition of Hughes, Verizon is in a much stronger position to tackle the manufacturer-provided device scenario, but it must also ensure it has the user-model scenario well covered through its ownership of network, device, and content assets that continue to make it attractive to drivers and passengers.
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