- Joe Astroth, Vice President, Autodesk Location Services, San Rafael, CA
- Walt Doyle, President, uLocate, Framingham, MA
- Clem Driscoll, Principal, C.J. Driscoll & Associates, Palo Verdes Estes, CA
- Johan Fagerberg, Senior Analyst, Berg Insight AB, Gothenburg, Sweden
- Sarfraz Khokhar, Cisco Systems, Durham, NC
- Lisa Peterson, Principal, LBS Consulting, Baltimore, MD
- Ofer Tziperman, President, LocatioNet Systems Ltd., Netanya, Israel
For convenience and brevity, we've broken this report into the four topics that we discussed with each:
MARKET CHARACTERISTICS (back to top)
What are the current market forces in play in LBS?
- Fagerberg - There is indeed a market for both consumer and business related LBS in Europe. The latest trend in Europe is the market for personal navigation services that is growing very rapidly. It started with the popular TomTom and similar navigators and nowadays many operators in Europe offer navigation services on the mobile. The package offered to the subscribers then includes a GPS with Bluetooth connection to the phone and the maps and points of interest (POI) is downloaded dynamically via the mobile network. The most well-know providers of these navigation services in Europe are Webraska, Wayfinder and Appello. TeliaSonera in Sweden has for instance launched the Telia Navigator with technology delivered by Appello.
- Doyle - In the wireless market specifically, I would say that we are in the middle of a four stages of growth: 1) Business (Fleet, etc.); 2) Business and consumer (Utility, navigation, etc.); 3) Consumer (Safety and Security; Family Finders, etc.); 4) Social Networking (Dating, Buddy Finders, etc.). The relative revenues are dependent upon the operators making the technology available to a 'mass' addressable audience which is happening now, but still has a way to go. Once the addressable market is available, we will see a proliferation of compelling consumer applications that delight users and will generate significant revenues on the consumer side.
- Peterson - GPS Navigation services appeal to both the business and consumer segments. However, in order to drive a higher penetration within the consumer segment, more promotions and price reductions will be required. Also increasing competition in this area will put more pricing pressure on these applications, so the margins will decrease over time, if operating expenses remain the same. A pay per use model for navigation could help drive more adoption.
- Astroth - It's all about
safety and security. - 50% of cell phone service is purchased for
safety and security reasons. Maybe the lines cross in 2005 but before
that was otherwise. Having a network that is absolutely reliable is
critical. A family must be comfortable with knowing "where".
What will drive consumer location services?
- Khokhar - The teenage kids who grew up with video games are the primary users of most the applications. They are attracted the most by all the bells and whistles on a handset. When these kids will become independent (some of them have already), financially and otherwise, the adoption barrier shall diminish to great extent. However security shall still remain a prohibition for the growth. The young generation is the one who adapts the new technology at least on mobile phones, and they would not like to be tracked. So privacy would remain the obvious barrier however some adventurous users shall break the barrier for selective applications. It might take few years. Please note US is behind in Video games and other consumer technologies than Japan.
- Peterson - The profitability for these services is dependent on volume and churn. Location apps that share location with friends find points of interest and provide static driving directions are typically priced below $5/month, in order to drive adoption in the mass markets. The application provider's operating expenses should be relatively low, since minimal customer support is required, and these apps can be sold through low cost channels, like the web. Thus, margins should be decent. However, consumer data applications tend to have high churn. The key to profitability will be to offer applications that stick and build customer loyalty/dependency, so the average lifetime revenue for these customers becomes more attractive. Also, it is necessary to create market awareness within the consumer segment to help drive mass adoption. Also, the introduction of pay per use billing could help drive mass adoption, as long as the service can be easily invoked in one step at the time of purchase. (The jury is still out on whether or not consumers will realize the benefit of location-based applications. Also, the challenge in the short-term is that not all phones can support the same types of LBS applications, which will be confusing to the consumers.)
- Driscoll - We are in the very early stages of the consumer LBS market. Our expectation is that there will be strong growth in the next 1-2 years in LBS apps such as navigation, assuming these apps are sufficiently robust and reliable when they are launched. Consumer interest in real-time navigation is evident from the rapidly growing market for Portable Navigation Devices (PNDs). In our view, cell-phone based navigation is a poor man's navigation system, though I do not mean that in a derogatory manner. It is a very low cost way to get access to real-time GPS-based navigation. Consumers will not consider cell phone based navigation to be as good a solution as a PND or vehicle installed navigation systems, but for many it will represent an improvement over printing out directions from MapQuest or Yahoo. Other applications such as Child Tracking also have potential for generating significant revenues for application providers and cellular carriers, but require a high degree of reliability and good indoor performance, which creates technical challenges for app providers and carriers.
BARRIERS (back to top)
Have different barriers to wide spread adoption of LBS appeared than what might have been perceived since the LBS shakeout of 2001?
- Fagerberg - There are really no new barriers on the market today compared to 2001. What one can say is that forecasts made by everyone in 2001 were unrealistic and most companies and analyst firms are today more cautious about making predictions on the market growth. The market is there and it is up to the operators to rock the market. There may come some help from both the Authorities on realizing E112 as well as insurance companies put pressure on consumers to install tracking devices in commercial vehicles as well as premium cars
- Tziperman - The promise of network based accurate positioning was not fulfilled. It seems that with the accomplishment of the SUPL (Secure User Plane for Location) standard, A-GPS will dominate the market eventually.
- Doyle - I believe they remain largely the same. Their greatest obstacle in the pathway to market opportunity is the speed with which operators enable location and make that available to the development community at price points which make sense in the consumer market.
- Driscoll - The principal barrier to widespread adoption of LBS has been lack of availability of LBS apps. It is anticipated that LBS apps will only be available on a limited number of phone models, when they are rolled out by Verizon and other carriers, which is expected to constrain subscriber growth.
What are these barriers now vs. in 2001?
Peterson - Current barriers to adoption:
- Inconsistency in how location services are supported across phone manufacturer/model and networks, even within a single carrier's environment may cause customer confusion
- Achieving the right business/partnership model between the carriers and application providers, so all parties gain
- Building the necessary developer support/partner programs
- Carriers are focusing more on delivering new multimedia services, such as TV, On Demand Video, Music/Radio on phones and not investing as much into creating the market awareness around LBS
- Carrier sales channels must be organized, trained, and incented in a manner which will drive sales of LBS apps., especially into the business segment.
- Poor indoor performance for A-GPS solution.
Barriers in 2001:
- Carrier delays in implementing E911/location technologies and lack of approved capital investment within the carriers to deploy the required LBS network architecture
- Privacy concerns
- Immature technology (e.g. GPS chip performance has increased since 2001)
- GSM providers launched network-based positioning method (Time Difference of Arrival [TDOA]), which was not very accurate, and practical for commercial purposes
- Lack of consumer awareness on LBS
What barriers must be overcome in order for consumers to demand wireless location services? Will 2006 be the year of more mass market location services?
- Tziperman - Privacy and relevancy. 2006 will show the direction for re-adoption of LBS services, but it will be mainly 2007 that we'll see the bigger demand.
- Doyle - I believe 2006 is a growth year where we will see some very interesting applications come onto the market. Mass consumer adoption cannot occur until the addressable market is there. "GEN X" and "GEN Y" are the X/Y generation! This is happening now and the early movers will have the pole position advantage as the larger audience become available.
Is price the main barrier to adoption for Mobile Resource Management solutions, for example, by small to medium sized companies? Privacy?
- Fagerberg - I don't think that price is a big issue for the slow take-up rather that some industries are slow in learning the benefits with new technologies. If an application developer wants to sell a fleet management system to a hauler they are usually very conservative and may not see the benefits that are obvious to the people developing the services. That has been one of the reasons for slow take up of fleet management services for commercial vehicles. Privacy is not a big issue. I think that most professionals can accept LBS being used at work if there is an obvious benefit or security issue that is resolved for instance. There will of course be some regulatory help coming up as well as help from insurance companies that can influence the uptake of Mobile resource management solutions.
- Tziperman - Price is the key.
- Peterson - We think process is more of a barrier. The process we refer to is for both the order/activation/fulfillment process that the ASPs and carriers are challenged with, as well as the internal processes for managing their delivery schedules, workforce, customer requirements, etc., that these companies are used to. The key is to make these new technologies easy to set-up and deploy, so there is a minimal learning curve and both the managers and employees realize an immediate benefit/ROI. There are also still challenges with distributing these applications to the end user and ensuring that all phones are configured correctly to support these services (e.g., have the right data plan, have a userid and password, have downloaded and installed the app. (and deleted other apps. if necessary), have been provisioned correctly in the carrier's order entry/billing systems, etc.). Once the application is deployed, then the company's challenge is getting their workforce to embrace the new technology, which can take time. Another barrier is the lack of market awareness. These solutions are not typically part of a carrier's national advertising campaign, therefore, the market awareness needs to be created through vertical marketing campaigns which consist of advertising in industry publications, partnering with industry associations, conducting targeted vertical direct mail campaigns, and most importantly, leveraging the carrier's direct sales force to push these applications thus, the right sales structure and internal sales programs within the carrier is key.
- Driscoll - Price is always an issue with smaller companies. However, other obstacles include lack of perceived need, since many companies have never used GPS tracking and these companies have difficulty assessing whether or not they will recoup their investment. GPS-equipped cell phone based MRM (mobile resource management) applications make this assessment easier for some companies, since the upfront investment required is small. Also, how to integrate GPS data into their operations can be an issue. In addition, some small companies hesitate to introduce GPS tracking for fear of a negative response from mobile workers who may be concerned about the impact on privacy.
APPLICATIONS (back to top)
Applications are going nowhere until handsets are location-enabled. Has Nextel or Vodaphone awakened the other carriers to realize the LBS potential or is this still difficult for carriers to develop a business model?
- Tziperman - Most operators are still waking up from their long LBS winter sleep. We start to recognize some new interest in good LBS applications, but it is only starting.
- Peterson - Other carriers and MVNOs (Mobile Virtual Network Operator) will be deploying these services in 2006, so yes, Nextel helped pioneer the way. With the Sprint-Nextel merger, Verizon has realized that they must offer similar business solutions to remain competitive and many of these business solutions will be location-based. Now the GSM carriers (who has invested $$ in the network-based positioning solution) are now considering launching GPS-enabled phones. Nextel has definitely shown that for LBS purposes the GPS solution is preferred method over the network-based solution (e.g. TDOA).
- Driscoll - Without a doubt, Nextel has shown that there is a large potential market for LBS. We expect all major carriers to roll-out LBS apps over the next 12-24 months, on at least some phone models.
- Doyle - Sprint Nextel is certainly the leader not only in enabling the technology, but also in working openly and aggressively with the developer community. I believe this is a strategy that starts at the highest level within that organization.
What is the current revenue model in commercial fleet applications?
- Tziperman - Fleet management are the more traditional LBS revenue generating applications, but with the new color phones and introduction of A-GPS, the potential is now shifting to mapping, directories and navigation applications for the consumer markets
- Peterson - For LBS apps, this varies. Average monthly charges per subscriber for fleet tracking/MRM applications range between $10 - $20/month. At the lower end of the price range, over the short-term, margins are thin, since these applications still require set-up instructions and customer support vs. GPS Navigation applications which also average $10/month, but are highly intuitive and require minimal post sales support. However, fleet tracking/MRM applications tend to build more loyalty and result in lower churn, so over the longer term, this customer becomes more profitable. As customers stay longer, it is also more likely that they will upgrade to a more premium service.
- Driscoll: Many Field Force Automation and Transportation/Logistics application providers are adding the capability to monitor mobile workers location through the use of GPS-equipped handsets. Many of these suppliers are profiled in our 2005-06 Mobile Resource Management Systems Market Study. Most of these applications have a higher monthly subscription fee than basic tracking applications, but they include many other features such as time and task management, dispatching and routing, etc. Most suppliers of these application consider GPS location to be a significant enhancement that makes these applications more valuable and more saleable.
What benefits/detriments does Wi-Fi bring to the wireless LBS industry?
- Tziperman - I do not see it as a major breakthrough for LBS in the foreseen future.
- Peterson - Greater opportunity for data access and location coverage (for example, indoors), where there may be gaps in the data and location coverage of the wireless carrier networks. The WiFi hotspots could supplement these gaps. The WiFi hotspots can return its location information instead of relying on phone or laptop to determine location. This will create a whole new market for LBS, based on WiFi coverage areas.
- Khokhar - Wi-Fi provides another mean for location tacking and hence has its own suits of application. Wi-Fi has vast implications on context-aware and pervasive computing. There are numerous application most tied to tracking. One killer application I thought long time ago, I am sure if somebody has worked on it or not, is Wi-Fi complimenting Wireless location estimation. The access points have known locations, they in turn can fine tune the exact location within a building or room.
- Astroth - There may be some niche markets for Wi-Fi applications in the LBS Space like in-door apps for asset management. Ulta-wideband, WiMAX for indoor wireless applications may not compete with cell carriers.
PLATFORM TECHNOLOGY (back to top)
What platform(s) or middleware appear to have gained favor with software developers for LBS applications? Java?
- Fagerberg - The most sold middleware platforms in Europe come from Sweden-based Mobilaris and Spain-based Genasys.
- Peterson - Definitely JAVA right now. Both Sprint and Nextel support J2ME and allow access to the GPS location information available on the handset through the J2ME environment. For server-based applications, developers are using MLP (Mobile Location Protocol) and OpenLS. These are supported by XHTML, SOAP, and other standards. Both Sprint and Nextel also allow developers to access GPS location information directly from the network. Sprint offers developers an API through the Parlay/OSA (ETSI 129 199-9) standard platform and Nextel's API is based on OMAs MLP. There are several infrastructure providers that currently provide location positioning servers (GMLC (Gateway Mobile Location Center) or MPC (Mobile Positioning Center)) and location middleware in the network. They are OpenWave, TCS, SiRF, TruePosition, Nortel, Lucent, HP, and Ericsson, just to name a few.
- Khokhar - Different SDKs, environments, and tools have gained popularity, which are in turn based on mainly C++ and Java. Java GIS has become a primarily environment to develop LBS services. C++ rich libraries are in high usage with many types of handsets. For example C++ developers can write applications that respond to opening and closing of flip phones, analogous to click in Windows. So, both Java and C++ are the main languages either directly or through tools, SDKs etc.
- Astroth - The Autodesk platform architecture is J2EE; on the handset side pretty equally focused or split on Brew and Java. Autodesk will focus on the complete value chain from platform to middleware, and authentication on the handset, plus moving geofencing and client technology to handset.
Or on the handset? Brew? Other?
- Peterson - BREW is supported by Verizon, which has plans to launch location services in early 2006. LBS Developers that are working with Verizon to provide commercial LBS offerings will need to also support BREW. In contrast to the Nextel iDEN network, which supported an open platform environment, allowing all JAVA developers to access GPS Location APIs, which now follow the JSR-179 standard, to build Location Based applications, Verizon does not offer developers an open platform for accessing GPS location through the BREW environment. Only approved developers are granted access to these APIs and allowed to access location data.
- Tziperman - J2ME in the GSM world and BREW in the CDMA world
- Khokhar - Development on handsets follows some standards but still a proprietary domain. It is tied to the chip sets used in the handset. Different companies push for their technology and platform to become the standard in the industry. For CDMA phone BREW is a great example. Similarly Intel has attempted to publicize their platform (XScale®) . J2ME, Palm OS, Symbian, Pocket PC and RT Linux (Real Time Linux) are the being used extensively these days. RT Linux being on the rise for smart phones.