Telematics and Connected Vehicles

Mike Peterson (LFM 94) Strategy Planning Manager OnStar [email protected]

Telematics and Connected Vehicles

Definition of Telematics Drivers Infrastructure Current & Future Offerings Challenges & Opportunities

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Definition of Telematics and Connected Vehicle

A two-way connection to and from a vehicle for data and information transfer Telematics is typically not:
Onboard autonomous navigation systems AM/FM radio

A telematics system consists of:

Vehicle (cell phone, GPS, vehicle data) Wireless interface Back-office systems
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Potential Components of a Telematics System

WIRELESS INTERFACE

Satellite / Microwave

Point to Multi-Point CELLULAR WIRELESS CONNECTIVITY

Fiber / Cable

ENABLED VEHICLE

CELL TOWERS

Application Management

Call Center

BACK-OFFICE
Content Providers
Source: Erik Bue
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SYSTEMS

Markets for Telematics

Vehicle types
Personal vehicles: cars, trucks Boats, motorcycles Work vehicles: mail trucks, semis, Border Patrol, Coast Guard, ambulances

Vehicle owners
Personal Fleets Military

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Value Propositions for Telematics

To consumers
Safety & security Time savings (navigation) Increased productivity (in vehicle)

To fleet provider
Optimization of assets (asset tracking, performance monitoring)

To business
Additional data from vehicles (warranty, usage) Increased vehicle sales (or price of survival)

To government
Improved infrastructure management (traffic, tolls)
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There is a significant market opportunity for telematics, if done right.

Wireless use is growing
US wireless industry is $80B (WSJ 7/28/03) 30 M US households will employ data networks by end of 2007 (Park Associates) Intels Otellini predicts that 1.5 B PCs will have wired or wireless broadband connections by 2010 Cable broadband services posting operating profits of ~60% (CIBC)

Consumers want to be more productive

Consumers pay $15-100/mth for cell phones & internet service providers Average US citizen spends 541 hrs/yr driving in vehicles (1.5 hrs/day) (NTPS) 97 M people in the US spend at least 37 minutes commuting in their car every day.

Automotive industry is highly competitive; features and services which provide a lead are crucial to success
Source: Erik Bue
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Predictions: Telematics-Enabled Auto Sales 12

10 8 6
4 2 0 USA W. Europe Japan

2002

2004

2007

2010
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Prediction: Telematics-Enabled Autos In-Use 45 40

35 30
25 20 15 10 USA W. Europe Japan

5
0 2002 2004 2007 2010
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Current Telematics Services - Consumers

Safety
Air Bag Deployment Notification Seat Belt Tension Notification Emergency Assistance Roadside Assistance

Remote Vehicle Operation

Remote Unlock Remote Horn/Lights

Information Services
Navigation Assistance Points-of-Interest Vehicle User Info Convenience Services Internet Based Services

Security
Automatic Theft Notification Theft Tracking GeoFencing

Vehicle Status
Remote Diagnostics
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Additional Telematics Services - Fleets

Fleet Performance
Maintenance Management

Fleet Tracking
Asset Management Vehicle Information Usage Monitoring Vehicle Tracking

Fleet Utilization
Customer Processing Paperless Manifest User log book Instant Messaging Job Dispatching
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Examples: OEM telematics offerings

Mercedes (Tele Aid): $240/yr + airtime to call center $75/yr route support/traffic package $1300 optional integrated phone $400 voice recognition option for phone
$2250 + airtime Includes portable phone and voice-activated controls $120/yr $1290 phone reqd for telematics $1800 navigation system reqd for telematics $240/yr Does not offer route support or remote diagnostics $200/yr for safety & security services (airtime included) $400/yr to include information & navigation services

Jaguar (JaguarNet): BMW (Assist):

Volvo (On Call Plus): OnStar:

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OEM Telematics Players Offerings over Time (North America)

1996

1997

1998

1999 CY

2000

2001

2002

2003

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Many opportunities exist in the future to enhance current services and create new ones.

Data services
Software downloads Content downloads

Enhanced vehicle diagnosis & repair Expansion into other dimensions of vehicle lifecycle (manufacturing, vehicle development, design) Key enablers for future services/growth
Communications bandwidth Coverage (wireless) Vehicle penetration Vehicle integration (messaging) Reduced costs (hardware, service) Standards (Bluetooth, vehicle messaging)
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There are many pieces of the puzzle which create value in telematics.

Marketing of services (education of consumers) Integration of services (menu structures) Integration of equipment into vehicle (human/machine interface) Connection of vehicles to content (wireless) Conversion of data into services (back office) Content providers (vehicle data, entertainment)

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Competition among service providers is seldom oneto-one; each player has a slightly different offering.

OEM-owned telematics service providers (OnStar) Aftermarket devices (LoJack, NetworkCar, Mobile Guardian) Independent telematics providers retail (ATX, Cross Country) Independent telematics providers fleet (Qualcomm OmniTRACS, @Road) Voice portals (TellMe, BeVocal, Internet Speech, AOL By Phone) Cell phone voice services (Verizon, Sprint) Auto club services (AAA)

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In addition, each piece of the telematics value chain has its own set of players.
Content
TeleAtlas, NavTech, MetroNetworks CNN, Disney, ESPN

Operating systems (Microsoft, Java, Linux) Vehicle hardware (Delphi, Nokia, Samsung) Voice recognition (Nuance, Speechworks, IBM) Call centers (EDS, GE, Cross Country) Business Operations (Digitas, Acxiom, Sigma)

Issues in partner selection: Volume capability Support capability (established firm?) Exclusivity Flexibility
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Finally, there are a variety of wireless technologies that can be applied to telematics.

Cell (Analog, CDMA, GSM; voice, data/SMS) Short-range communications (Bluetooth) Medium-range communications (802.11) Satellite communications (Boeing Thuraya, XM Radio, Sirius)

Issues in technology selection: Level of ubiquity Reliability of technology Upgradability Level of control over provider (multiple sourcing)
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Challenges Hardware/Technology

Clockspeed mismatch
Telematics services (1-6 months) Consumer electronics (6-18 months) Vehicle development process (3-5 years) Vehicle ownership lifecycle (6-15 years)

Shifts in technology (analog digital) Technology application (client vs. server) Challenges Societal Government regulation (FCC E911) Interface with emergency service providers

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Challenges Strategic/Financial

High cost of infrastructure

Investment = control

Involvement of multiple partners Packaging of services

Wide variety of customer needs/wants Consumer confusion

Selection of business model

Upfront equipment sales Service subscription Grow critical market mass Operating efficiencies Licensing/royalties

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Examples of Business Models In Play

i-Mode DoCoMo: Define platform for 3rd party software development: monthly revenue from: basic service, data traffic and fee from 3rd party service providers Microsoft: Create the OS for vehicles that becomes the standard that all future consumer telematics applications must be built off of OnStar: Seed network through factory-installation onboard vehicles purchases Cell Cos: Compete based on lowest price to service quality ratio TiVo: Charge monthly service fee upfront at a discount Palm/PDA: Define & market hardware & OS; nurture application developers. Make alliances with Cell Cos. Dell: Least expensive, custom-assembled modular systems based on commodity components Leverage COTS Components: eg Apple iPod: Over 1M people have been willing to pay $300-500 for the 5-40GB drives.
Source: Erik Bue

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Parting Thoughts

Telematics represents a significant but complicated opportunity.

There are many ways to create value in telematics, many of which have yet to be fully exploited. The telematics industry is a network of partners across a variety of disciplines. The winners in telematics, as well as the ultimate potential of the industry, is yet to be determined.
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Open Questions (for discussion)

How does/could your business participate in this space?

What needs to happen to unlock the full potential of telematics? What service domains will be most important in the future? What business model(s) do you think will be most successful?
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Appendix OnStar Overview

OnStars Beginnings

1996
Employees Subscribers Hardware Services Database Advisor Seats 18 1 Phone 8 600K 6

2002-3
436 2M+ 5th Generation 15 7M 1,000+

Distribution

1,500 Dealers

Factory
90%
25

Brand Recognition 1%

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Portfolio of Core OnStar Services

Safe & Sound

Automatic Notification of Air Bag Deployment

Emergency Services Roadside Assistance Stolen Vehicle Location AccidentAssist

Directions & Connections

Luxury & Leisure

All Safe & Sound services plus:

Route Support/Directions

All Directions & Connections services plus:

Personal Concierge OnStar MED-NET

Information/ Convenience Services

RideAssist

Remote Door Unlock

Remote Diagnostics Online Concierge 26

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OnStar Personal Calling

Embedded in vehicle Hands-free, voice-activated interface Pre-paid minutes No roaming, no long distance charges Nationwide wireless network coverage

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OnStar Virtual Advisor

Personalized web-based information delivered to the vehicle using handsfree, voice-activated interface
Stock Quotes
Fidelity Investments

E-mail Sports Scores/News

The Sporting News Radio ESPN.com

News
Wall Street Journal ABCNEWS.com CNNRadio

Weather
Weather.com

Entertainment
Disney.com

Traffic
Metro Networks/Tele Atlas
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XM Satellite Radio

XM Satellites

Rock

Roll

Two Geo-stationary satellites

1,700 terrestrial repeaters
Terrestrial Repeaters

In-vehicle equipment
- Receiver - Antenna

- Radio head unit

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