Do consumer telematics services have real potential?

By Jamie Moss

The embedding of machine-to-machine (M2M) communications technology within commercial vehicles for the purpose of allowing fleet tracking is already a mature market in the enterprise services sector. The value proposition for fleet owners in terms of the implications for their internal operations as well as for the services that they can offer to their own customers as is clear.

As a consequence, the business model for fleet tracking is proven, is readily repeatable and gives a good return on a per-connection basis for fleet tracking service providers. Even if the number of fleet vehicles in existence represents a specialised and limited addressable market that only makes up a small percentage of the total number of vehicles on the road.

The value proposition and business model for auto OEMs that wish to embed telematics systems into passenger vehicles is also clear. Emergency crash notification and remote diagnostic systems may not yet be mainstream options let alone standard features, but both of them play to the auto OEM’s core competency of selling vehicles as they provide vehicle-specific service enhancements.

Emergency crash notification and remote diagnostics are preventative measures designed for the anticipation, avoidance and expeditious reconciliation of troublesome situations. They have low-bandwidth communications requirements and predictable usage profiles. They do not put the auto OEM in an awkward position with regard to the amount or the cost of bandwidth required, operating invisibly to deliver latent but on-demand functionality.

Consumer telematics services

What seems less certain however is the potential for consumer telematics services. They are not M2M services in the traditional sense but they are certainly related to them. Consumer telematics services often involve a degree a degree of human interaction in setting up service delivery options (which may be automated from then on) or in manually requesting on-demand content. For they extend to the car access to ‘infotainment’ material previously only accessible elsewhere.

With consumer telematics, the question of which party should be responsible for doing what – and who it is that ‘owns’ the rights to the relationship with the customer and their money – is less clear. So there are a number of questions that need to be answered before the market can emerge in earnest: Who should be paying for any connectivity, as well as how much of the technology required to deliver the services should be embedded by the OEM versus brought-in in an aftermarket fashion by the end user?

Also, should auto OEMs by trying to step outside of the realm of their core competency to become content distributors, plus how can you possibly reconcile the connectivity costs associated with high-bandwidth streaming media or an ‘open Internet access’ service model? There has been a lot of discussion about infotainment services and mobile apps for the automobile market but, critically, is it something that the consumer would actually ever be willing to pay for on a recurring basis?

The draw of the mass market

Embedded communications and the M2M market have traditionally existed to allow for the creation of operational efficiencies, cost savings and improvements to the quality of existing services that have their own proven business models and which are already being delivered to existing customers. I.e. they have been for the sake of bolstering established product lines rather than for generating new and discrete revenue streams.

But the M2M market at large presently has great hopes for the potential of the consumer electronics vertical to generate brand new service revenues streams. Thanks to the impact already made by game-changing devices such as the Amazon Kindle, where seamless embedded connectivity is a fundamental part of the devices value proposition.

The consumer electronics industry consists of many thousands of different devices being sold to many millions of people worldwide. Its sheer scale means that any level penetration achieved by devices that rely upon embedded connectivity will result in significant sales and profits for the manufacturers that conceived them. In light of which, it is fully-understandable and only natural that the telematics market should also be excited about mass market consumer opportunities for communications-based in-vehicle services.

It’s good to talk

At the Consumer Telematics Show (CTS) in Las Vegas on January 9th 2012, important topics relating to the future of the consumer telematics market are scheduled to be explored: How the upsell of premium content may reshape the business model for telematics. How innovations in Human Machine Interface (HMI) could help to deliver the usability required to kick-start the market. How existing telematics delivery platforms can be reused to provide innovative driver-centric services without needing to be re-engineered – plus how dynamic content and applications may be safely delivered to passenger vehicles as personalised packages of services.

Informa Telecoms & Media’s Senior Research Analyst Jamie Moss will be at CTS, where he is keen to meet with other companies that are interested and involved in this intriguing market sector for mobile communications. The day after CTS the Consumer Electronics Show (CES) will also begin its four-day run in Las Vegas. Informa Telecoms & Media’s mobile and fixed-line devices and content specialists Dave McQueen, Jamie Moss, Andrew Ladbrook and Giles Cottle will be in attendance too. So please do get in touch – we look forward to seeing you at both events!