Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
You’ve probably heard talk about the “connected car” – a car that has a built-in cellular (or Wi-Fi) connection, and is connected to the Internet and cloud services. In fact, it’s a lot more than talk, as several car models are already shipping with cellular connections.
The dropping costs of wireless Internet, the rising availability of fast cellular networks and the trend towards smart connected consumer electronics have caught up to the auto industry, and your next new car will probably be connected.
Meanwhile, an increasing number of conventional cars are also getting connected, but here the motivation is largely IVI, or in-vehicle infotainment. IVI, in theory, means a mix of yellow page-type lookups, “find the nearest,” navigation, streaming audio and rear-seat video options. But in practice for 2013, the most tangible IVI feature on offer will be streaming radio solutions like Pandora, Iheartradio, Last.fm, Slacker, A-Ha Radio, etc. It seems as though customized Internet audio is the low-hanging fruit of the IVI category.
Telematics is the oldest of the connected car categories. Telematics generally includes things such as the location of the car, the status of the engine, speed or excessive brake use. Businesses and people can use telematics to remotely unlock their car, to track their kids or find stolen cars or communicate maintenance needs with a repair shop. Electric car owners can use telematics to check on the charge in their battery or to remotely activate climate control systems.
Asmore cars get on the Internet, one of the big debates raging in the auto industry is how the cars will be connected. The main options are to put a cheap 2G radio in the car, to put a fast “4G” radio in the car or to use the onboard screen to “mirror” the driver’s smartphone, and use their existing cellular data plan. This issue seems like a simple choice, but is actually fraught with cost differences, user experience variations and a massive power struggle.
Cost as a driver
The cost issues for connected cars are tied to the type of cellular radio, because the radio generation is closely tied to how much data is expected to be carried by a cellular partner of the carmaker.
A 2G radio is cheaper device, but more importantly it is only capable of slower data speeds and less bandwidth-demanding Internet applications – specifically precluding streaming media. A car with such a radio can still provide many valuable connectivity services, such as remote control, telematics and rudimentary Internet point-of-interest searches.
Because of the limited data appetite, the ongoing connectivity bundle might be priced as low as $5 per month (Garmin once had this price for PND connectivity), or a number of months of service can be bundled into the price of the car.
Carmakers and their dealer networks are very fond of the 2G solution, because it is simple, low-cost and enables remote diagnostics of the car that could steer users into their dealerships for scheduled or preventative maintenance.
A 3G or “4G” radio in the car is a much more expensive overall proposition. The radio chip cost slightly more, but these faster data networks are capable of moving a lot of data each month and the carriers are going to want to be compensated for heavier data traffic. The only reason that a 3G or “4G” radio gets put into cars is to add the IVI features that the 2G radio cannot provide. And once the service includes streaming audio like Pandora, drivers can consume lots of data, but also highly variable and unpredictable amounts of data. If you consider rear seat streaming video, the data load can potentially be massive. The end result is that 3G or “4G” would be offered with pricey data plans that are capped, scaring off many customers.
Because of the high data costs associated with “4G” radios in cars, carmakers are considering the “mirrored” solution, where the car connects to the users smartphone using Bluetooth, Wi-Fi or a cable, and then taps into the driver’s cellular data plan. This can be much cheaper because the user already has a data plan. Even if the user needs to move up a tier of service on the smartphone data plan, it usually is cheaper than adding another “4G” device. A mirroring solution must limit what apps can be mirrored to those which are safe for in-car use, i.e. no videos.
Power struggle
But in all the above is hidden a massive power struggle. It becomes a question of “customer ownership.” Between carmakers and the cellular industry, just who is driving and who is riding shotgun? Carmakers that put the cellular radios in the car have a chance to be the providers of ongoing telematics and infotainment services, and could even act as mobile virtual network operators. Those carmakers that offer mirroring are largely relinquishing control to the cellular carriers. But it’s not that easy a decision: just because a carmaker chooses to put a cellular radio in a car doesn’t mean the driver will use it. If the services aren’t as good as, or better than the user’s smartphone services, the user will just put their phone right in front of the dash and cut the carmaker out of the equation.
A good solution would be to bundle a 2G radio with telematics services included into every car and offer “4G” options (in-car or mirrored) as options. The carmaker could try to own telematics, while relinquishing IVI to partners.
But how it will all shake out remains unclear at this point. It is only certain that many approaches are being tried and there will not be only one solution for all brands and trim lines of cars. Yes, your next new car will be connected … but how?
Liz Kerton, analyst for The Kerton Group, which manages the Telecom Council of Silicon Valley and the Autotech Council, follows innovation across all wireless telecom sectors. On twitter @telecomcouncil.
