Telematics Tempest

Analysts claim the telematics industry is poised for explosive growth in the next five years. It will be a $20 billion market by 2006, says one. The telematics market is expected to grow 90% a year for the next five years, says another.

The problem with those predictions is that they depend on a technological backbone that is not yet in place. In order for that potential to be realized, and money to be made, serious research, innovation and standardization needs to be logged.

Carriers can all see the potential of partnering with car manufacturers to create new systems. Verizon Wireless is working with GM and their Onstar service. Sprint PCS is teaming with Lincoln and Lexus. And, AT&T Wireless recently announced a deal with Daimler Chrysler.

Although carriers are taking their own approaches to telematics, most agree that without technology breakthroughs, amazing growth models won't be realized.

“As far as the keys to enabling growth, you need voice enablement, meaningful content on the other end and location services,” said Joe Averkamp, Sprint PCS senior director for automotive telematics.

Sprint's services today include the Lincoln Vehicle Communications System, which allows people to dock a wireless phone in their Lincoln and use a voice-command system through their car stereo. But, Averkamp agreed that there must be technology changes in order for Sprint's system to see exponential growth.

“What we would like to see is automakers move to a more open standards arrangement,” Averkamp said. “Then, you could bring different phones and different carrier brands into the car.”

Eventually, customers will demand that type of ubiquitous telematics.

“All of this today is being addressed on a very proprietary basis,” said Sanjiv Nathwani, DiamondCluster partner. “They're all creating their own de-facto standards. Ultimately though, the consumer is going say, ‘I want interoperability. Why can't you make it possible?’”

Right now, AT&T's telematics agreement with Chrysler is the closest thing to an open standard because the system will work with any Bluetooth-enabled, voice-capable device. It won't matter if the device's carrier is AT&T or Verizon. Of course, incentives will be in place for consumers to use AT&T, but they will have a choice.

“It allows customers a lot more flexibility to choose what they prefer,” said Don Boerema, AT&T Wireless senior vice president for mobile multimedia services. “They might have to put an accessory on or make sure they have a Bluetooth device. But, we're not asking them to change, necessarily.”

Analysts like this type of agreement.

“It's a better approach,” said Dan Garretson, Forrester analyst. “It makes sense. Onstar is very vehicle-centric. It's going to be hard for them to extend outside the vehicle. On the other hand, AT&T is already outside the vehicle. They can now bundle services that are in the car with an existing calling plan.”

AT&T's plan will allow customers with Bluetooth devices access to the car's telematics systems without requiring a docking station or embedded wireless system. Just setting the phone or PDA on the seat or dash or floorboard will activate the system.

Because wireless access won't be part of the car, customers will not have to pay a separate telematics bill. They will only pay for the MoUs they incur in the car. The aftermarket version of the system will be available early next year.

By 2003, the system will include an in-vehicle installed rearview mirror with a microphone and send and end buttons. When a call comes in, drivers can just push the send button on their mirror, talk hands-free via the mirror's microphone and listen through the car's stereo system.

However, this system relies on unproven Bluetooth, causing some in the industry to raise a red flag.

Bluetooth Blues?

Because Bluetooth-enabled devices have yet to take off in the United States, this could pose a problem for AT&T.

“They're doing this before there are very many Bluetooth devices,” Garretson said. “There isn't much experience with the technology, and there's nothing to support it.”

Averkamp from Sprint PCS agreed.

“Bluetooth is a little bit out there,” he said.

Add to this concern the ongoing industry battle between Bluetooth and 802.11.

“Is Bluetooth going to be in these devices? Yes,” said Dave Baker, DiamondCluster partner. “You're seeing more phones launched with it; you're seeing more add on devices, which is fine. But, it's not going to compete with 802.11 in speed.”

AT&T is not concerned about the debate or the lack of devices.

“We'll have Bluetooth solutions available when we launch,” he said. “We're seeing Bluetooth on all of the roadmaps of all of the manufacturers we do business with.”

Customers want a telematics solution they can upgrade easily, Boerema said, and putting Bluetooth in handsets is an economical way to allow that. Keeping the device mobile, as opposed to embedded, also is important.

“That's the nice thing about Bluetooth integration: When you go to the mall, you just bring the device in with you,” Boerema said.

Boerema said billion-dollar growth estimates actually might be conservative, based on how much time users spend in cars and on their phones. Statistics reveal that as much as 70% of phone minutes is used in the car.

But, Boerema agreed that a stronger technology backbone needs to be in place before the industry sees that growth. AT&T's solution clearly won't work without Bluetooth devices. It also needs a sophisticated microphone that won't pick up road noise.

But, further down the line, in order for the system to mature, there needs to be grander developments. Location-based services will enhance the experience for consumers and open the door for many more telematics applications.