Susan Kuchinskas looks at why phone-based apps combined with embedded services will remain the dominant telematics paradigm for the next five years
Just look at the most important telematics applications: navigation and usage-based insurance, or UBI. The phone dominates navigation and it's emerging in UBI.
Last summer, research firm Frost & Sullivan pointed out that low-cost smartphone technologies are bringing navigation into the mass market as they edge out personal navigation devices and installed services. Frost & Sullivan expects the North American market for navigation systems to be at 18.7 million units, smartphone navigation subscribers to be at 402.2 million, and the telematics service subscribers installed base (including OnStar, SYNC, BlueLink, UConnect, etc.) to be at 31.6 million by 2016.
To a great extent, the continuing dominance of phone-based navigation comes down to the scale of the smartphone market attracting most of the development talent, plus the far greater ease of launching a phone-based app. (For more on smartphones and telematics, see Telematics and the ‘built-in’ vs. ‘brought-in’ debate, Telematics, smartphones and the future of connected infotainment and Six reasons the smartphone is key to auto telematics.)
"While huge progress has begun to be made on embedded navigation, infotainment and communications platforms, it still is going to take a long time for that to trickle down through the different tiers and the installed base,” says Patrick Connolly, senior analyst for ABI research. “In 2017, we forecast over 20 million connected cars globally. That's just a drop in the ocean."
The indispensible smartphone
Besides, Connolly says, phone-based navigation will also lead the way in indoor location technologies, making the phone even more indispensible and therefore more dominant.
The phone continues to grow in power and value as a connected device, says Leo A. McCloskey, vice president of marketing for Airbiquity, which designs connected vehicle solutions and operates a global service delivery platform.
"People are walking around with two very important components in this whole voice interaction world,” he says. “One, there is a lot of processing power in their hands all of a sudden. Second is a lot of bandwidth. Put those two things together, and you have a distributed voice engine where you can take different components and apply them to service infrastructure to create a safer infotainment environment in the car that is also very highly personalized to the things that you do."
Updating apps and information is also vital, and that's another area where the phone has the edge, according to John Canali, senior analyst in the Strategy Analytics Automotive Multimedia and Communications practice. "Quite possibly, maps on your phone will be more up-to-date than a map stored on an SD card," he notes. (For more on updating apps and information, see Telematics and the hybrid approach to content delivery and Can telematics infotainment services be future-proofed?)
Phones for UBI
Meanwhile, the phone is emerging as a tool for gathering data on driving habits. For example, Aviva announced the trial of a new driver behavior app called ‘RateMyDrive’. The Android app measures not only acceleration and braking, but also cornering. (For more on UBI, see Smartphones as an incentive for insurance telematics and Special report: Insurance telematics.)
A hybrid phone/embedded solution is a more desirable means of delivering UBI services, Connolly says: "There's huge opportunity in telematics in providing applications to run in the car, whether that's insurance, diagnostics or driver information."
Phones are open platforms with lots of developers, he points out: "If you can get it connected to the car, so much can be done. And for premium service, the phone is a better place."
Frederic Bruneteau, managing director, Ptolemus Consulting Group, agrees. "At least until the end of the decade and even further,” he says, “there will be a cocktail of very different technologies, and the smartphone will be one of them. It solves many issues."
First and foremost, according to Bruneteau, is that it eliminates the cost of producing and distributing a separate UBI device as well as the additional cost of a data plan for it. There is one phone-based service already running in Europe, with a couple of commercial trials either under way or being planned. Expect more to emerge in 2013.
The major challenge of using the phone is, as for many other apps, the user experience. If you run the app while you're driving, will it drain your battery, thus ceasing the data flow?
Phones are cheaper, too
Right now, with most consumers unaware of connected car services, cost is a big factor. Consumers who haven't experienced the benefits of embedded telematics services—and are only spending $13,000 or more on a vehicle—are unlikely to be willing to spring for an embedded solution.
Canali points to Verizon's acquisition of Hughes Telematics; soon after, Verizon announced shared data plans that could be spread among devices. "Presumably, the car would be the next thing," he says. “Embedded still will be an important factor but its role will change. Most bandwidth-intensive stuff will be from the phone."
As the cost of data plans for phones continues to fall, Scott Sedlik, vice president, product planning and market development for Inrix, a provider of traffic services, says that using the phone for connectivity—perhaps connecting to an in-car screen for display—is the model that will continue to gain traction.
On high-end vehicles, however, Sedlik doesn't believe that OEMs will want to focus on the hybrid approach. "If you have a BMW or an Audi, and you're supposed to put your phone in the cup holder and use that to navigate,” he says, “that's not what BMW or Audi want for your driving experience. They are looking for a much more integrated experience."
Brought-in solutions and infotainment
One final reason why the smartphone model will continue to prevail: the money.
According to Keefe Leung, director of product management for Airbiquity, "The industry has evolved to the point where embedded makes sense for crucial functions like safety and security that want to be always on. But bill-of-material issues and costs make the brought-in solution compelling for infotainment-type features, especially if you start looking at things like V2X and how the car would communicate with the outside world." (For more on V2X, see Special report: Telematics and V2V/V2X technologies.)
ABI's Connolly says that it's too difficult for automakers to charge a monthly fee to their customers: "That model is something they've toyed with, but no one has come up with a way that works. That's why hybrid is interesting: You don’t need to worry about the charging model. The OEM will not make money from data charges but that was never the business model."
Susan Kuchinskas is a regular contributor to TU.
For more on apps, see Special report: Telematics and apps.
For more on UBI, see Special report: Insurance telematics.
For the latest on apps, attend Content and Apps for Automotive USA 2012 on December 4-5 in San Diego.
For all the latest telematics trends, check out Telematics Japan 2012 on October 9-11 in Tokyo, Telematics Munich 2012 on October 29-30, and Telematics for Fleet Management USA 2012 on November 13-14 in Atlanta.
For exclusive telematics business analysis and insight, check out TU’s reports In-Vehicle Smartphone Integration Report and Smart Vehicle Technology: The Future of Insurance Telematics.
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