Chet Huber is selling safety, security and peace of mind. And, he says, people are buying.
Huber, president of General Motors’ telematics company OnStar Corp., offers up plenty of evidence for his claim: a total of 2.5 million paying customers, renewal rates above 50 percent and-perhaps most importantly-financial profitability.
“The way this is being positioned is not as a substitute for mobile phones,” he said. “This is a `peace of mind’ positioning.”
There is no doubt about OnStar’s position in the telematics industry. The company is far and away the world’s leader, and for eight years it has been at the forefront of telematics advances. But predictions of imminent doom have long plagued OnStar, rumors that intensified after the demise of Wingcast, the telematics venture of Ford Motor Co. and Qualcomm Inc. Huber quickly dismisses such concerns, but he also admits the company has faced its share of challenges.
“We’re still learning where the sweet spots are,” he said.
Indeed, the first version of OnStar didn’t allow users to place phone calls. Subsequent versions featured rigid pricing structures. However, Huber said the company is slowly rising above its growing pains, an assertion shared by others in the industry.
“Customers are starting to see the value proposition of the service,” said Frank Viquez, director of automotive electronics for research firm Allied Business Intelligence. “They’re the biggest service provider out there. You can call them pioneers in this area.”
Today, OnStar offers a variety of features and services. Under its “safe and sound” plan for about $200 per year, users can get help after an accident, roadside assistance, stolen vehicle tracking and other services. For a little extra, users can purchase driving directions and information services. For a lot extra, users can buy a personal concierge service that will set up hotel reservations, restaurant dates and conduct other helpful business. With any service plan, users can add a personal calling feature by purchasing prepaid calling minutes.
OnStar’s service works through an embedded Motorola Inc. phone and GPS unit, which includes an antenna and power setup making it roughly fives times more powerful than a standard mobile phone. The service runs primarily over Verizon Wireless’ analog network, although it can also roam onto other networks. OnStar’s services are managed by a team of hundreds of trained employees spread across OnStar’s three calling centers.
The benefits of OnStar are numerous, Huber explains. But the primary advantage is peace of mind, as highlighted by a major OnStar advertising campaign. The radio and TV commercials replay actual user conversations with OnStar call-center employees, and range from the mundane lost key to the major traffic accident. Huber said the campaign-which includes more than 100 such commercials-has been a success.
OnStar is a subsidiary of auto giant General Motors, and does not report on its financials. However, GM has laid to rest concerns over the venture by stating that OnStar is financially profitable and that its renewal rates are around 50 percent-much higher than those in the industry once believed. Further, OnStar will be installed in 1.5 million vehicles this year, available in everything from GM’s Hummer H2 to Subaru’s Outback and Volkswagon’s Jetta.
Although Huber maintains a positive outlook, OnStar is by no means alone in the telematics industry. ATX Inc. is probably its closest competitor with about 500,000 subscribers, but there are also a variety of startups and challengers looking to upstage OnStar. For example, DaimlerChrysler will soon offer its Bluetooth UConnect product as a dealer-installed option for $300, which allows users to connect their Bluetooth phone to their car’s audio system to make hands-free calls. Cellport Systems is offering a similar scenario, which includes a docking station that can be installed in a car and detachable pockets that are customized to fit specific cell-phone models.
“I think if you look down the road, the after-market will be the biggest market,” said ABI’s Viquez.
OnStar’s Huber remains unshaken.
“Every docking scenario … we’ve looked at,” he said.
Bluetooth has not yet been widely embraced by the mobile-phone industry, Huber said, and in the future could be supplanted by another technology such as Wi-Fi. Most importantly, Huber said, a docking scenario assumes that a user will always remember his or her mobile phone-which provides much less peace of mind.
Still, OnStar is looking to address the issue. Huber strongly indicated that OnStar will offer some type of sharing plan, allowing mobile-phone users to place calls using the OnStar system and have those minutes billed to their pre-existing mobile-phone plan. Huber said the service would work much like a family plan, with the OnStar system taking the role of a spouse or child.
“We believe there are opportunities in the intelligence of the network itself,” Huber said. “I think you’ll be seeing some announcements from us relative to this portability relatively soon.”
Also in the future Huber said OnStar could work with fellow GM business XM Satellite Radio Inc., and could use part of XM’s satellite bandwidth to deliver downloadable video. Huber also said OnStar is testing various pay-per-use services to potentially add to its yearly subscription model.
OnStar “is able to offer the full end-to-end turnkey solution,” Viquez said, predicting that additional carmakers likely will install the OnStar system.
