Telematics Detroit 2005

By Hal Reid

I spent last Monday (May 16th) at the Telematics Detroit 2005 Conference.This was my first experience at this conference.

Two things struck me immediately.The first was that this industry is 20 years old and is still struggling with growth and both consumer and commercial acceptance.The second was a question posed very early in the conference by a panel to the general audience: "How many of you are working for companies that are actually making money in this industry?" Other than the panel of four, there were four hands raised in the audience.

What is Telematics?
From the Oxford English Dictionary: "The branch of information technology which deals with the long-distance transmission of computerized information."

Looked at another way, it's the blend of two words: telecommunication and informatics: the linking of mobile things (vehicles, people, cell phones, PDAs, etc.) to remote sources of information and entertainment.

Event sponsors included companies we know well, such as Microsoft, NAVTEQ, Tele Atlas, IBM, National Semiconductor and Sony Ericcson. Certainly these companies are profitable, but as noted by the hand count above, they may not be profitable in this industry.

My sense is that while there are some great technologies and applications, there did not seem to be a vision to tie them all together.While everybody agrees that the technology has merit, telematics may be a solution in search of a problem.There is also confusion about whether the applications are purely to be used by businesses, or if they have consumer appeal.It was a bit like traditional GIS and Google Maps.Traditional has the science, Google has the users.

Telematics in 2005 and Beyond. Thilo Koslowski, Lead Automotive Analyst and Vice President at GartnerG2, proposed that an industry transformation was in progress, and is being driven by:
  • Consumer demand to enhance the driving experience
  • Consumer electronics pushing the curve
  • Content integrations such as cell phones plugging into the user's car and working hands-free
  • A new set of content and service integrators
  • Concerns about data and security
Security, as mentioned in this context, is beyond just location tracking, (where are you?), but security of the in-vehicle systems themselves in terms of data and the integrity of their operating systems.This last point is very interesting because most of us have not considered identity theft from your car, getting a virus or being spammed while driving.

Koslowski said that in the past 12 months, there has been some growth in the industry and that the opportunities are in the consumer aftermarket, new consumer vehicles and commercial vehicles.

To actually achieve sustainable growth, he went on, the price has to come down and consumers need to be better educated.Prices is always an issue and always becomes lower (unless it is the price of taxes), but complaints about consumer education indicate that either the message is not getting out or the actual usefulness has not been well explained.. Koslowski said that the price consumers will pay to add this type of service to a vehicle they already own is $165 (for installed technology, service fees extra); for a new vehicle it is $395.Note that OnStar from GM is a $695 option, almost twice the accepted price level, and yet OnStar is successful.

The number one consumer-perceived benefit of telematics currently is safety.However, as the mobile worker becomes more the norm, and work is more and more done wherever (home, office, car), telematics will become more useful.Telematics could hasten the blurring between your PC, your PDA and your phone.I think Koslowski inadvertently identified what is really needed and marketable ‑ seamless access to the Internet wherever you were.

Delivering Value Daily: Useful and Useable. Gregory Payne, Director, Service Line Management and Enterprise Quality, OnStar.This was the keynote address..OnStar is a discrete business unit within General Motors and is actually making money.It has 4 million customers and as of 2005, OnStar had achieved 100% brand recognition.OnStar is the poster child for telematics.
Here are a few of the basic average monthly calling statistics.
  • 20,000 roadside assistance calls
  • 300,000 routing support calls
  • 7,000,000 personal calls
  • 13,000 emergency calls
  • 23,000 remote diagnostics
  • 60,000 weather requests
On a typical Friday, OnStar handles 50,000 calls.

Since the introduction of OnStar in1996 the company has updated its hardware six times.The company is able to cycle improvements, delivering innovation to the customer faster than almost anything else in the world of GM, according to Payne.

OnStar recently developed a relationship with XM Radio to offer real time traffic as a download (coming soon to a GM car near you) and the ability to use XM Radio as the pipe for data transfer.XM Radio can transfer data at rates higher than the 256k OnStar currently offers. The interesting thing is that this is a one-way transfer down, with uplinks handled by the cell phone network.

At the ESRI GeoInfo Summit in April, James Akright of General Motors Powertrain, also presenting about OnStar, said that OnStar has the ability to sense the need for calibration changes and can download software and calibration updates directly to the vehicle.This opens a whole host of possibilities not just for maintaining the software and operating systems in your car, but for transferring data through OnStar to your PDA or laptop in real time.

OnStar recently added French and Spanish language support as well as support for users with hearing disabilities.

An OnStar Demo
To follow up on the OnStar experience, I visited my local GM dealer, Paul Masse Cadillac, GMC and Pontiac.Jeff Burniske, the sales manager, walked me through the features.As I mentioned before, OnStar is a $695 option available on most GM vehicles.A basic monthly fee of $16.95 gives you the following services.:
  • Automatic Notification of Air Bag Deployment
  • GM Goodwrench Remote Diagnostics
  • Stolen Vehicle Location Assistance
  • AccidentAssist
  • Online Concierge Services
  • Emergency Services
  • Remote Door Unlock
  • Roadside Assistance
  • Remote Horn And Lights's website has a table showing the Hands-Free calling plan options.

Just in case you haven't seen a demo of OnStar, it is hammer simple to operate - three buttons: Call, Disconnect and Emergency.In a way, in spite of satellite technology, this is the 1930s phone system.When you connect to OnStar, a real person answers, or if you are using Verizon through OnStar, your phone call is connected by a person.If you had the data links, access to the Internet and connectivity with your existing cell phone for hands free use, this would be the perfect system for anyone who spends a lot of time on the road.

Partnerships That Increase the Telematic Value Proposition.This was a panel moderated by Paul Hansen, Publisher, The Hansen Report on Automotive Electronics.There were four panel members:
  • Stell Patsiokas, Executive VP, XM Radio
  • John Slosar, Director of Electronics Systems, Visteon
  • George Salmi, Business Development, IBM Telematics and Asset Monitoring
  • Paul Drysch, President of Sales,
This was the session that I mentioned before, when only four people in the audience said they were making money.

The primary point covered in this panel was the need to partner up and integrate other technologies such as WiFi, Bluetooth and common connectors such as USB to make telematics systems in the vehicle more useful.The key partner example was OnStar and XM Radio, which gives XM Radio better access to GM customers, and GM access to a faster data network.

USB is a means to integrate the PDA, laptop and cell phone into the vehicle systems for communications and navigation, but not as a means for the user to add his own data to any of these system.I thought this was an interesting oversight, as the typical Directions reader would want to put his or her own data into the navigation system.

A very interesting topic that came up, but was not explored, was the ability to use OnStar vehicles as nodes on a network.Could I access the hot spot via that Cadillac parked in front of Starbucks from here in the parking garage from my GM car instead of driving there? The panel only had a 30 minute time slot.

Understanding the Dynamics of the Automotive Buyer and Owner. Harvey Cohen, Founder and CEO of Strategy Analytics, spoke to traditional aspects of marketing.Who are the customers? What are their priorities? What do they want and need? He brought an interesting set of statistics on the distribution of car buyers:
  • 65% buy economy cars
  • 33% buy mid-range cars
  • 1.5 to 2% buy premium cars
Cohen said bundling along with other add-ons (e.g.door locks, tilt wheel, etc.) is the way to add telematics features, and they have found that the bundle prices can't be more than 5-10% of the total vehicle price.So in lower end cars, bundles are limited.Of course, some bundles work better than others depending on the price range of the buyer.

Prices for navigation systems (CD and hard drive systems) are currently around $1,050 (note Koslowski and the acceptance price point of $395). Therefore, they show up mostly on premium or mid-range cars.

Digital radio prices are around $250, putting them at the high end for economy cars and into mid-range and premium cars.If satellite radio can serve as the data pipe, it could be cheaper than OnStar, and more universal, but it needs to be integrated into the vehicle's systems.

OnStar, at $695, has the greatest acceptance in mid-range and premium cars.However, if it becomes standard equipment, this may be a considerable competitive advantage for GM.My GM dealer reports that OnStar is a fairly easy sell on any car ordered by a customer.The problem is creating the right bundles and determining the customers' willingness to pay.Bundling is always problematic, as you always want to include what the customer would like with what you would like the customer to buy.

Automobile companies have perhaps the most intensive market research departments in the world.If Cohen's numbers are right, it may be difficult to move in-vehicle telematics to the mainstream as long as 65% of the buyers are looking at economy cars, and these features are in the mid-range to premium price ranges.

I have to admit that my first impression was, "if nobody is making money and there is not a clear vision for this industry, why are we here?" After a day or two of thinking about the conference, I think I now understand.The commercial market for data transfer, fleet and tire management systems, the entire infrastructure that supports our mapping techniques of geofencing, plotting points and routing is alive and well.What is needed is real-time access to the Internet at viable speeds, and effective integration of home office, typical office, and those things you use while on the road.This includes the integration of PC, PDA, cell phone and the vehicle itself.

A simple thing I saw from the OnStar demo down at my GM dealer was that talking to the OnStar person was about as distracting as talking to someone in the car - pretty safe.

An interesting issue was that all of the telematics and on-board navigation systems didn't seem to allow the user to add data.It seemed like you might want point of interest to you, rather than the picked for you, generic data set.We in the Directions community could provide that.Maybe we need to get closer to this group.They may be like the business intelligence and location intelligence guys - we have more in common than we realize.We might even get there ahead of Google or some else who has a good view of the consumer market and can provide the type of mass customization that people will not only want, but pay for.

Published Monday, May 23rd, 2005

Written by Hal Reid

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