Location Services: Where Next?

OK, so I have a thing about maps – but that’s not the reason I’ve just produced a new Unstrung Insider research report called Mobile Location Services: Keys to Mass Market Success. Mindful of the hype that engulfed location-based services last time around (circa 2000), I’ve actually managed to off on writing about it.

Now, location is back on the agenda in a big way. Driven by the emergence of low-cost GPS positioning technology, 3G access networks, and powerful smartphone devices, operators once again sense an opportunity from a new wave of location-aware wireless applications.

Here’s a summary of four key issues covered in the report that are set to influence the market for network-positioning technology and location-aware applications:

Local Search & Mobile Maps
New applications such as Google (Nasdaq: GOOG) Maps for mobile, Microsoft Corp. (Nasdaq: MSFT)'s Live Local, and the new improved Yahoo Inc. (Nasdaq: YHOO), Yahoo! Go designed specifically for mobile search and mapping are showing just how useful location could be to everyday users.

Without question, these applications would benefit from the ability to automatically locate the user. As well as removing the requirement to manually input an address, auto-locate features would mean that search results could be better tailored to the user’s circumstances. Known as “contextual awareness” in Web jargon, the same principles apply to hipster social networking and messaging/presence applications, such as Jaiku , Loopt Inc. , or BuddyPing , or to any number of user-generated content applications.

Problem is, Internet companies have struggled to strike deals with wireless carriers for access to user location data. Instead, it’s the operator-branded mapping and search applications, such as Orange Local (using a hosted service from start-up m-spatial Ltd. ) from Orange UK , that are delivering the best user experience today.

Things could be changing, however. Vodafone Group plc (NYSE: VOD)’s recent statement that it would work with Google Maps on auto-locate and local search services is explicit recognition that customers prefer to interact with services and brands they know and love from the wired Internet.

Personal Satellite Navigation
Whichever way you look at it, the market for satellite navigation is exploding. In Europe it’s already said to be the fastest-growing consumer electronics segment after flat-screen TVs, while in North America 2006 was a break-out year. And with unit growth of between 50 and 100 percent expected in 2007, there’s a huge opportunity for wireless carriers.

On example of a carrier getting this kind of product so right is Telefónica Europe plc (O2) (UK), which has packaged high-end CoPilot navigation software from ALK Technologies Inc. as a free “accessory” on monthly plans costing £40 per month, including a free smartphone with integrated GPS receiver. Without any above-the-line promotion, the offer is already said to be running way ahead of expectations.

The big debate in carrier circles is whether to go with an on-board (data stored locally on the device) service and use the network for real-time updates as O2 has done, or go for an entirely off-board service (data is hosted on network servers).

Whatever route is chosen, telecom players getting into the personal navigation game spells trouble (and perhaps opportunity) for the standalone sat-nav providers such as TomTom International BV and Garmin Ltd. . In the end, it may only be the underlying pricing models of the two major providers of source mapping data, Tele Atlas NV and Navteq Corp. (NYSE: NVT), that determines how cost-competitive the wireless carriers can be.

Watch also for the elephant in the room. Nokia Corp. (NYSE: NOK)’s February 2007 launch of its mobile mapping application “smart2go,” available free on the Internet, will be deeply disruptive. With an upgrade to full turn-by-turn navigation offered for just €60 ($80) per year, this is sat-nav for the everyman.

GPS Technology
GPS is obviously a critical positioning mechanism, but what was once a specialist technology has now moved emphatically into the mainstream. Driven by advances in chipset technology, handsets with integrated GPS are set to become commonplace.

In the CDMA market Qualcomm Inc. (Nasdaq: QCOM)'s strategy of integrating GPS with cellular baseband silicon has already proved a huge success, with the company having shipped over 200 million GPS-capable devices to date. It’s now set to push the same kind of deep integration through the WCDMA market with its next-generation gpsOneXTRA program.

Bluetooth specialist CSR plc (London: CSR) is also focused on GPS integration following its acquisition of NordNav for $75 million earlier this year. Using a software-based solution the company believes massive cost-reduction is possible and is targeting a GPS bill-of-materials of just $1 by 2008.

Others believe the optimal price/performance trade-off – with an emphasis on performance – is found in single-chip GPS. One supplier taking market share and securing handset design wins with this kind of product is Global Locate Inc. , which is competing head-to-head with SiRF Technology Inc. in the single-chip segment. Both vendors offer pricing substantially below $5.

Network Positioning Mechanisms
Deriving user location data has traditionally been the preserve of network operators. In GSM networks that has meant the use of techniques such as Enhanced Cell-ID or the more accurate and expensive Uplink Time Difference of Arrival (U-TDOA). While in CDMA markets Assisted-GPS with Advanced Forward Link Trilateration (AFLT) has prevailed.

The buzz now from network-positioning vendors such as Andrew , TeleCommunication Systems Inc. (TCS) (Nasdaq: TSYS), and TruePosition Inc. , surrounds hybrid positioning architectures that allow the operator to determine location using whatever mechanism is most appropriate for the accuracy, yield, and latency requirements of the application or handset in use at the time.

This all feeds into what could turn out to be a revolution in the way location data is made available to third-party developers via operators' application programming interfaces (APIs). Driven by the reliability requirements of Emergency 911 in the U.S., location data has traditionally been passed between handset and network over the control plane. Now, for non-emergency applications, the emphasis is on accessing location APIs over the user plane using IP. This more affordable and scaleable architecture is known as the Secure User Plane Location architecture, or SUPL, and is backed by an Open Mobile Alliance (OMA) interoperability program.

From a services perspective, the key question about user-plane access to location APIs is: Will it make lookups cheap enough for developers to build really compelling location-aware applications, or will they be forced into over-the-top applications using standalone GPS and/or SS7 signaling hacks to bypass operators altogether?

— Gabriel Brown, Chief Analyst, Unstrung Insider

The report, Mobile Location Services: Keys to Mass Market Success, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.

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