What is Automotive Telematics and why is it sick?

By: Dan Keegan

Date: Thursday, 24. August 2006

"The patient is sick ... but there is a cure." That statement was made recently by Andrew Cole, Senior Vice President of Adventis, a leading management and strategy consultancy to the bewildering array of technology companies that are busy assembling the automotive technological wave that is titled "telematics."

Cole was addressing Telematics Detroit 2002, a global conference on the latest strategy developments in this burgeoning field. His "patient" comment was aimed at the sticky reality of implementing the visions of the wireless super-connected automobiles of the future touted in the media over the past few years. The recurrent theme at the Detroit conference on May 15 and 16 was that telematics is difficult to define, highly complex in its development and that the whole effort requires highly integrated partnerships and alliances in order to succeed.

At its core, telematics is all about wireless connectedness--by voice, text, graphics, video, and even detailed data about the technical status of the vehicle. Some telematics goodies that most people know about right now are navigation assistance, traffic information, tracking of stolen cars, and automatic notification of emergency services if the car crashes.

Many of the technologies are already in use, but euphoria about the technological implementation of the grand vision (telematics systems in every car) has given way to a mixture of pessimism and determined optimism in the face of the difficulties ahead. The two-day conference was pervaded with a sense that the whole effort could founder on the rocks of bad decisions amongst the top players unless a cohesive system of partnerships and alliances can be made to work--and of course the consumer has to buy into it.

The technology players are varied, and they have to commit to cooperation, common standards, and huge investments, but the revenue models that point the way to profits have not yet clearly manifested themselves.

The principal issues

Consumer acceptance: Despite the apparent success of GM's OnStar initiative, consumer acceptance for telematics innovations is problematic. OnStar is cell-phone based, always on, and is built around a voice relationship with a "virtual advisor" who is available at the touch of a button. The service is standard on 34 out of 54 GM models for 2002. It's a subscription-based service. The first year is free, and there are three packages to choose from after that, priced from $17 to $70 per month. There are currently about two million subscribers, and OnStar is coy about when it expects the service to become profitable (or if it is already). However, the subscriber model is not unanimously accepted as the way of the future. "Pay-per-use will be the dominant model in the future," predicts Carlo Cardilli, vice president of business development for Kivera, a company that provides location-based solutions such as in-vehicle navigation and voice-interaction services. "All-you-can-eat plans won't work," he told conference attendees. People will want to pay for services if and when they use them.

The driver: Another potential stumbling block is the whole issue of driver capability. With 24 U.S. states considering legislation curbing cell phone use in cars, and laws already implemented in a number of countries, driver distraction issues are high on the telematics priority list. Responsible use of telematics services by drivers will be a critical issue in moving the market along. "Hands-free use is the dominating feature that customers will pay for," said Jack Withrow, Director of Telematics for Daimler-Chrysler. Speech recognition technologies are seen as offering solutions in this department. However, these technologies have their development problems, and research into the distraction problems of cell phone use seems to indicate that it's the engaging nature of the cell phone interaction that's the issue rather than the physical interface with the technology. Drivers chatting or surfing the web from their cars could present a huge liability risk to manufacturers.

Who does what: There are contentious issues around who does what in building telematics systems. Are the automakers greedy or overly ambitious about wanting to go it alone, maintaining control over the technologies and the customer bases generated? Should all of the telematics systems be embedded (built into the automobile) or should some parts be portable, such as telephone handsets and Internet enabled computing devices? Who sets standards for hardware and software? There were no definite answers to these questions emerging at the conference.

The pace of innovation: One of the key points brought out at the conference is that automakers and telematics technology developers have different development cycles. In the electronics world, products can evolve from one generation to another in a matter of months. In the auto world it can take years. If telematics technologies are built into the vehicle, there's the spectre of a new product being obsolete by the time the vehicle hits the street.

Reliability: with consumer reluctance in mind, automakers and other telematics players are concerned that systems work flawlessly when consumers finally do make the commitment.

Privacy: The super-connected car brings on many fears (some rational, some not) about privacy. In a post-9/11 world some mental privacy barriers may have been knocked over, but the fully connected automobile will be capable of giving out information about drivers and vehicle owners in a variety of ways. Marketers of telematics technologies will have to assuage public fears about this.

The cure?

In all the deliberations at the Detroit conference, what came across most strongly is the key role of the driver. The technology may be wonderful, but the driver has to see its value and want to use it. And if the driver doesn't use it responsibly, the world of regulation may cast a dark cloud over the telematics landscape, slowing development and limiting markets.

"Consumer education is a long-term effort," Harel Kodesh told the conference. Kodesh is a former vice president of the consumer appliances division at Microsoft and is currently CEO and vice president of Wingcast. At Microsoft, he led the development and marketing of Microsoft windows CE operating system.

Wingcast is a joint venture of Ford Motor Company and QUALCOMM. It has positioned itself as a developer and deliverer of wireless mobility and information services that will bring voice, entertainment, internet access and safety services into cars and trucks. Located in San Diego, California, Wingcast is a "systems integrator," pulling together the different elements of the telematics vision. (Ed. note: Soon after this article was written, Wingcast was terminated. The company no longer exists)

"Telematics is not a get-rich-quick proposition," said Kodesh. The players are telematics service providers, equipment manufacturers, wireless carriers, hardware and software manufacturers, content providers and service providers. Everyone in the value chain must make a profit, and this will require flexibility and creativity in putting the entire enterprise together, from the vehicle architecture platforms to the wireless delivery systems with which the driver interacts.

However, he pointed out, at the end of the day, consumer research is paramount. Consumers must see the need, and they must understand what's possible. A more sophisticated vehicle owner and driver is a telematics essential.

Note:

Telematics Detroit 2002 was organized by EyeForAuto.com and TelematicsUpdate.com. It brought together a galaxy of the leading executives and technologists behind the automotive telematics wave.

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