The Changing Face of Telematics
IVsource.net
30 May 2003

Was telematics “roadkill” on the information super highway; an artifact from the technology boom of the 1990s?  Or is it still a promising new field to provide connected services to vehicles?  While the hype that once surrounded telematics is gone, there still remains a passionate belief within the industry that the vision of telematics can be recreated to hold onto a bright future.  One of the believers is telematics expert Kevin Davis, who provided this article to IVsource.  This extensive article discuses where the telematics industry has been and where it is headed; it defines telematics, examines the telematics sub-markets, discusses the role of the wireless carrier, presents related standardization efforts, compares telematics in the US and Europe, and highlights a few trends to watch.

Was telematics “roadkill” on the information super highway; an artifact from the technology boom of the 1990s?  Or is it still a promising new field to provide connected services to vehicles?  While the hype that once surrounded telematics is gone, there still remains a passionate belief within the industry that the vision of telematics can be recreated to hold onto a bright future.

In an attempt to shed light on these questions, this article discusses where the telematics industry has been and where it is headed.  This illumination is achieved by defining telematics, examining the telematics sub-markets, discussing the role of the wireless carriers, presenting related standardization efforts, comparing telematics in the United States and Europe, and highlighting a few trends to watch.

What is Telematics?

To begin with, the term “telematics” is still a relatively new one and needs definition.  The term is believed to have originated from combining the terms “telecommunication” and “informatics;” however, this provides little tangible insight.

For some, telematics is simply a GPS-centric "concierge" service for passenger vehicles.  The General Motors OnStar system is often cited as the defining service for telematics when the term is introduced to someone for the first time.  For others, there seems to be little distinction between the more general wireless or mobile industry and telematics.

Indeed, wireless communication does play a significant role in telematics, which is discussed later in this article.  As such, telematics can be adequately placed as a sub-industry to the wireless industry.  However, telematics has taken on a distinctly automotive aspect.  The “connected vehicle” is a very unique environment with special requirements that make it a quite distinct industry.

Telematics: 
remote information exchange with vehicles over a wireless medium

With these factors in mind, a fairly broad definition of telematics is given here as follows: “remote information exchange with vehicles over a wireless medium.”  One could argue that this definition is so broad it even includes the AM radio, which clearly was not considered a telematics system when it was first installed in cars soon after WWII.  Nonetheless, the AM radio is a valid example of a first generation telematics service.

First generation telematics devices are comprised of specific in-vehicle hardware dedicated to specific information exchange.  For the most part, the telematics industry is currently in its second generation which involves interaction between specific communication hardware and other specific hardware in the vehicle.

As an example, consider a GPS system coupled with a mobile phone that yields a remote, position-dependent concierge service.  Another example is the current onboard GPS based navigation systems, e.g. the Neverlost system available in Hertz rental cars.  While navigation systems are not traditionally thought of as telematics, they are a second generation telematics service in that the system obtains information remotely, via the GPS, and couples it with an onboard mapping engine.

In addition to these consumer-oriented examples, there are now business-oriented telematics systems and services emerging, including remote fleet services and remote vehicle diagnostics.

Third Generation Telematics

The next, or third generation of telematics is where the most uncertainty lies for the industry.  Third generation telematics promises to provide further vehicle integration and commonality among the services that deliver information to and from the vehicle, and in the rendering or use of that information.  Why have separate navigation, concierge, theft, diagnostic, and infotainment systems with their separate in-vehicle hardware and communication channels?  Could they not all be integrated and use common infrastructure?

Further, since the exchange of information -- regarding both content and medium -- can take many forms, the various telematics services themselves could be delivered to generalized in-vehicle hardware on an as-needed basis.  In other words, why have navigation in your car 365 days a year when you know how to get to work every day?  As one of many future services, the next generation of telematics promises navigation on demand, e.g., on the weekend or on vacation, as well as navigation that is integrated with many other services, such as traffic information and points of interest.

While many compelling arguments can and have been made for the next generation of telematics, the current market conditions are such that the business model and the consumer’s interest must be carefully gauged first.

Although the term “telematics” is still relatively new, it is not a new industry.  Rather, telematics is an evolving industry.  That evolutionary nature breeds a passion for the future of the industry.  Unfortunately, the current market conditions cast gloom on how and when the industry will arrive at that bright future.

The Telematics Market

Consideration of the boundary between the business side and the consumer side of telematics provides a convenient means for subdividing the telematics market.

The consumer telematics sector is perhaps the most commonly known.  Typically a telematics service in this sector focuses on providing entertainment and information content to the vehicle.  As examples, consider the current telematics offering of GM’s OnStar, which is now offered in many models across all of the GM brands as well as other non-GM brands.  Other current consumer telematics service providers include AAA’s Response Services, ATX, and Network Car (now part of Reynolds & Reynolds).

The consumer telematics market has been the primary source of the hype surrounding telematics during the 1990s tech boom.  The vision was that the driver would be able to simultaneously download MP3s, check email, news, sports, and weather, and surf the Internet.  

Unfortunately, most of the people who had such a vision of telematics lacked the appreciation of the requirements of the automotive environment and marketplace.  As one can imagine, it becomes impossible to effectively drive the vehicle while doing all of these things.  

Further, the people who might actually want to do any of these things are in the minority relative to the greater automotive market.  A significant portion of automotive buyers still do not know what an email or an MP3 is, or how or why you would download one.  Even among many of those that do know, they would rather not do so while in the car.  And even among those that do want these services in the vehicle, many do not want to pay for it.  That first generation telematics device, the AM (or FM) radio, does a good job of delivering news, weather, sports, and traffic information.  The email can wait until the office, and most people already know how to get to work.

In light of the technology fallout it seems that consumer telematics has faired even worse than the norm for other technologies would have suggested.  Indeed, all of the above services are now available on mobile phones.  Even if the market conditions were favorable, the old vision of telematics would be losing out to the mobile phone market.

The silver lining on this cloud is that consumer telematics providers now have the opportunity to rethink the offering.  While the tech fallout spelled a demise for the “connected lifestyle” vision of telematics, it has forced telematics service providers to identify with the automotive industry rather than with information technology.  At the end of the day, the automotive manufacturers sell cars and trucks, not airtime or Internet access.  They cannot give the car away free and bill for monthly services as in the mobile phone industry.  Instead of asking how they can make money selling telematics services to the driver and passengers, they are now asking how they can save costs and/or increase the value to the customer over the lifetime of the vehicle.

Some examples of these types of consumer telematics services include remote diagnostics and remote vehicle updates.  For example, if the firmware in the various electrical controllers in the vehicle can be upgraded remotely in the field -- potentially even to correct for a mechanical flaw -- the potential savings in vehicle recall costs alone can be enormous.  In addition, the consumer is saved from the hassle of returning his vehicle to a dealer, and the automotive manufacturer avoids bad press.

Other examples include improved anti-theft systems with vehicle tracking; automated emergency dispatch after a collision or airbag deployment; and variable taxation and insurance based on where and/or how the vehicle is driven.  These types of services will drive the future of consumer telematics -- whereas email, if it is offered at all, will just be icing on the cake.

As with general automotive electronics, consumer telematics can be further subdivided into OEM versus aftermarket.  While the service offering for the consumer varies slightly from one case to the other, the OEM and aftermarket telematics service provider each have their respective advantages.

The OEM, as the manufacturer of the vehicle itself, can optimize the vehicle integration and therefore minimize overall telematics system cost.  In addition, it has a 'captive' customer to whom it can offer a free trial period for the telematics service.  However, the automotive industry has a certain reputation that precludes any real ability to experiment with the market.

In the aftermarket situation, many solutions are available from the more dynamic electronic consumer product industry.  Consumers could already be bringing MP3s in their cars if only the car radio had an audio input jack for their Apple iPod.  Offering Bluetooth, or a similar short range wireless communication, in the vehicle, so that drivers could interface with their cell phones, laptops, PDAs, and other such devices, contradicts a fundamental paradigm of the automotive industry.

For contrast, consider the cell phone industry.  A consumer can now send and receive pictures and play games on their mobile phone.  Do consumers actually want to do these things with their phones?  Even the wireless service providers do not know for sure, but they are willing to risk putting these products in the marketplace to find out.  The more established automotive industry cannot afford to take such risks, nor should they.  The automotive environment is unique in that the regulation and liability concerns are like no other industry.

That said, however -- if there ever was an industry that could benefit from such market experimentation, it is consumer telematics.  Aftermarket telematics service providers have a real opportunity to explore what consumers might want and how much they are willing to pay.  Unfortunately, they missed the opportunity when it was the strongest, during the 1990s technology boom.

The business submarket of telematics is often referred to as the 'fleet market.'  While often thought to be an established and saturated market, it actually holds tremendous opportunity.  Most fleet services are intended for large fleets, e.g., long-haul trucking or package delivery, and are installed in the aftermarket.  Qualcomm is a dominant supplier in this area.

Often these fleets are so large that the solution is highly customized.  For instance, UPS built and maintains their own fleet services solution.  However, a significant portion of fleet vehicles are not actually in a large fleet; most are in fleets of less than ten vehicles.

As an example, a local commercial or residential air conditioning dealer may have three service vehicles in his fleet.  He wants to make sure the vehicles are well maintained, not only because a breakdown jeopardizes his relationship with the customer, but also because he does not have a large fleet from which to draw a replacement vehicle.  He wants to make sure the repairman is on the right job at the right time, such that the schedule is optimized.  Perhaps most importantly, he wants to know where his vehicles are, e.g. how long the vehicle is at a particular job or at lunch, to make a last minute schedule change, whether the vehicle is located somewhere it should not be, or whether the repairman is moonlighting with the company vehicle after hours.  

Currently, the fleet owner, the air conditioning dealer, does not have such a fleet system as it is cost prohibitive.  However, there are thousands of other fleet owners who want the same fleet services.  Herein lies the 'sleeping beauty,' as the economies of scale DO apply.  This opportunity argues for an OEM -- instead of aftermarket -- telematics device capable of delivering a standard -- instead of customized -- set of fleet services, to be installed on trucks and vans as an option for small fleet owners.  The power of fleet services becomes cost effective for the small fleet owner by aggregating his demand with many other small fleets.

While the current service offering of the consumer telematics service providers (e.g., OnStar) makes little sense relative to the fleet market, much of the underlying expertise and infrastructure to design and deploy such a fleet system is already in place.

The Role of the Wireless Carrier

It goes without saying that wireless communication is an important aspect of telematics.  Unfortunately, the chaotic wireless market has further added to the troubles that the telematics industry is facing.

The central theme, if there is one, in the wireless market is the push for faster data rates.  While the cellular providers struggle to make third generation cellular work, the growth of Wi-Fi hotspots threatens to destroy their investment.  In the midst of this race, the wireless concern for telematics is not about data speeds.  After all, telematics is not about downloading MP3s and email any more.  Even the current second generation digital cellular data rates are fast enough for most telematics services.  For telematics, the concern is the longevity and coverage of the wireless service.

A telematics service provider does not want to deploy a system in a new vehicle based on a wireless service that may not be available in three, five, or ten years.  Further, they do not want to deploy a system based on a wireless system that only works in the major cities.  The telematics service provider needs a wireless service with ubiquitous coverage and the longevity to last the lifetime of the vehicle.

Until the wireless providers address these issues, telematics faces a major hurdle.  With the possible exception of satellite radio, the wireless providers have expressed little interest in supporting the automotive environment.  Short of providing their own wireless service, telematics service providers are left with little choice.

Telematics Standards

While, as noted above, telematics is an evolving industry, there are a few related standardization efforts worth mentioning.  These include the Automotive Multimedia Interface Collaboration or AMI-C, the Open Services Gateway Initiative or OSGi, and Microsoft’s .NET.

AMI-C is a global organization of automotive manufacturers and suppliers tasked to create common specifications for in-vehicle information and entertainment systems.  In short, AMI-C specifies the in-vehicle infrastructure that a telematics system would use, including in-vehicle networks and various hardware and software device interfaces.  AMI-C is currently a delightful technical playground for hashing out new ideas.  What remains to be demonstrated is the cost-effective practical application of these ideas.

OSGi is a global alliance to define open specifications for managed electronic services on networks, in homes and vehicles.  In essence, an OSGi framework serves as the application server, except that it is designed to run on embedded devices -- such as an in-vehicle telematics device -- instead of on enterprise server hardware.  

While OSGi does not specify JAVA as the underlying programming language, all commercially available OSGi frameworks to date are based on JAVA.  JAVA is a natural selection for OSGi, but it is perhaps not so natural for the automotive environment.  That is not to say JAVA is a bad choice for the automotive environment; it does indeed offer many advantages over C and other such programming languages.  However, desktop JAVA programming is very different from JAVA programming for resource-constrained devices.

Many of the most basic programming principles need to be reconsidered in light of this constrained environment, and consequently even the best desktop JAVA programmers in the world  may be challenged.  Further, it is a misconception that the automotive manufacturers want an “open” system at all.  Indeed, a closed, proprietary, non-standard system can offer a high degree of optimization to meet specific performance requirements.

Microsoft’s .NET framework, which is not actually a standard, serves to connect all kinds of data and applications on the Internet.  These Internet based data and application sources are often referred to as 'Web services.'  To date, Microsoft has made little headway in the automotive industry, despite their interest in expanding their product offering in this direction.

One reason for this situation is that there is a general lack of regard for Microsoft in the automotive industry.  Indeed there is 180 degree difference in attitudes.  What Microsoft sees as innovative, the automotive industry sees as risky and foolish.  What the automotive industry sees as thorough product development and testing, Microsoft sees as a waste of time and money.

Another reason Microsoft has had a lack of presence in the telematics market is more fundamental.  As discussed in this article, telematics is no longer about the Web in the car.  Simply put, Microsoft lacks the knowledge of and exposure to the automotive environment that is now at the core of telematics.  Nonetheless, Microsoft has a certain perseverance that makes .NET worth keeping an eye on.

Telematics Myths: US Versus Europe

As with other industries, there are many misconceptions about American telematics consumers versus European consumers.  While these misconceptions are typically dismissed as cultural differences, they actually are quite often due to non-cultural differences.

For example, some in the telematics field believe that cultural preferences are that Europeans favor graphical displays in the vehicle, while Americans favor audio.  Unfortunately the issue is not that straightforward.  For one, various state and federal regulations in the United States determine the location of displays with respect to the view of the driver.  Other concerns, such as driver distraction and other human factors issues, also play a role.

Further, the existence of OnStar and other such telematics systems in the United States has conditioned the US consumer to prefer a voice-based system.  However, let us not forget the consumer reaction to the talking cars of the early 1980s.  

On top of all these concerns, a voice-based system typically has an advantage in cost over a graphical display.  The point is that human-machine interfacing, in the automotive industry and otherwise, is an active area of study.  The consumers in the United States and Europe will see all types of user interfaces in their vehicles in the future.

In the past many believed that telematics would progress in Europe faster than in the United States because of the relative states of the wireless industry.  The idea was that because Europe had selected a particular cellular standard, GSM, whereas the wireless providers in the United States each had their own technology, Europe would reach faster data rates sooner, and would therefore deploy telematics sooner.

This result has not turned out to be the case for two reasons.  First, the competition inherent in the US wireless market has bred faster data rates.  Both 2.5 generation technologies by Sprint and Verizon exceed the data rates of GPRS, the 2.5 generation equivalent of GSM.  Second, as this article argues, the wireless concern from a telematics perspective is not the data rate, but the longevity and coverage of the wireless service.

Another misconception is that navigation is not necessary in the United States as all the streets are laid out like a grid.  Apparently, these people have never been lost in the Big Dig in Boston or been at the intersection of Peachtree Street and Peachtree Street in Atlanta.  In turn, this lack of need for navigation in the United States is supposedly to delay the introduction of telematics and to drive a voice-based system when it is introduced.

Whether the United States, Europe, or any other part of the world for that matter, is ahead or behind in telematics is neither here nor there.  Each geographic area has unique requirements and no single telematics system can cover them all.  Just like the “world car,” there is no “world telematics system.”

Trends to Keep an Eye On

Satellite radio, e.g. Sirius and XM Radio, is becoming increasingly popular for its high quality audio and universal availability.  While on the surface it appears to be a fancy first generation telematics device, it has the potential to be a catalyst for the next generation of telematics.  

As satellite radio is inherently data-centric, it is trivial to dedicate a few channels to data.  While it is broadcast, instead of two-way, the content can be customized through a secondary back channel, e.g., some kind of wireless modem or even through the Internet when the driver is at home.  In turn the in-vehicle device can pick off the relevant information based on a unique identifier.

The current subscription process works in a similar manner.  Map updates, traffic information, and all kinds of customized content could be delivered over satellite radio.  Further, satellite radio fixes the coverage problem inherent in the United States.  Satellite coverage is ubiquitous, whereas even the analog cell phone coverage is not universal.  Also, by starting with a service everyone already likes -- music and talk radio-- satellite radio has the foot in the door with the automotive manufacturers.  It is much easier to add telematics services to satellite radio hardware already occupying space in the vehicle than it would be to add a new telematics device.

Navigation has been and continues to be a telematics service worth monitoring.  However, as a consumer telematics service, navigation is limited.  As pointed out above, consumers do not need navigation to get to work every day.  Further, the intelligent, off-board, on-demand, navigation mentioned earlier, with integrated traffic and construction information, also has a questionable appeal.  

On a psychological level (an analysis of which admittedly has yet to be applied to telematics), we know that consumers like their cars for the feel of power and independence.  The automobile has been an icon of personal freedom in the United States for many years, and the continuing SUV craze is argued to be an extension of that appeal.  

On a subconscious level, then, navigation flies in the face of our culture by telling the driver where to go.  Further, the intelligent navigation systems not only tell the driver where to go, but that he is a fool if he goes any other way.  For such an advanced navigation system to be accepted for daily use by consumers, it needs to be a traffic information system with navigation, not navigation with traffic information.  

The difference is technically subtle but exceptionally important on psychological and marketing levels.  Otherwise, the appeal of navigation on the consumer side of telematics is limited to when the driver is in specific need of directions, e.g., he is out of town on business or vacation.  Typically, this situation occurs in a rental vehicle and is in essence a fleet situation -- not consumer telematics.

Another telematics service that has been considered recently is pay-as-you-go tolls, tax, or insurance.  The idea is fairly straightforward: base tolls, tax, or insurance on where, when, and even how you drive.  

Often the first concern raised with such a service is privacy.  Typically the privacy concerns are addressed by calculating the bill in the vehicle on a regular basis, deleting the log after the calculation is done, and transmitting only the total.  However many believe, rightly so, that this method is still inadequate in ensuring privacy.  

The next concern that often arises is the cost of such a collection system.  Typically, such a service is sold to the constituency by citing studies that show the majority will pay less toll, tax, or insurance.  Indeed that may be true.  However equipping every car with such a device, along with the communication and other infrastructure required, is an enormous cost.  In aggregate the toll, tax, or insurance will increase.  While such a service may be attractive to one’s personal expenses, they may wish to consider the impact on the economy as a whole before electing to do so.

Wrapping it All Up

The vision of telematics from the 1990s technology boom is, fortunately, dead.  Equally fortunate is that the telematics service providers have begun the process to recreate their telematics offerings from an automotive perspective.  What remains to make the new telematics vision a reality is to find a permanent ubiquitous wireless technology, and to muster a bit of old fashioned conviction.

Mr. Davis has been working in the automotive industry since 1995 and specifically in the telematics industry since 2000.  He has held technical development, project management, and business development roles in telematics and has had numerous discussions with people from all aspects of the telematics industry.  He holds engineering degrees from Georgia Tech and MIT. He can be reached by email at publius@montezillo.com or by phone at +1.617.331.4600.

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