M2M Platforms

Carriers Test-Drive Connected Car Biz Models

US operators are placing different bets on how consumers will want to pay for in-vehicle connectivity and the apps and services it powers.

AT&T Inc. (NYSE: T) is hoping its customers will see their car as just additional devices to add to their shared data pools, while Verizon Wireless is discovering that pay-per-app resonates best. T-Mobile US Inc. and Sprint Corp. (NYSE: S) fall somewhere in between.

Just as tablet connectivity is a $10 add-on, AT&T announced Wednesday that connecting an Audi would simply be a $10 add-on to a Mobile Share plan. For those customers not pooling their data, they can choose to pay for a six-month or 30-month plan -- $99 for 5GB of data over six months, $499 for 30GB over 30 months, or $20 per month for 1GB of data. (See AT&T Makes GM Cars a Data Plan Add-On and AT&T Tests Drivers' Desire to Pay for LTE.)

Verizon has found that customers prefer the iTunes models in cars, paying for just the apps they want to use, according to George Ayres, vice president of global sales for Verizon's telematics division. Speaking at the recent Insurance Telematics USA in Chicago, he said that the wireless subscription model hasn't resonated in the car industry. (See Verizon CEO: Self-Driving Cars Could Hit Road Soon, Pics: Insurance Telematics Goes to Chicago and Verizon Creates a Mobile ZipCar.)

"They're used to buying songs one at a time, pay-per-use, so they are not as interested as they used to be in subscription model," Ayers said. "As the service set gets bigger, many are not ones they use every day, so they're just buying what they need."

An example he cited is a concierge-on-demand-type service or turn-by-turn navigation, both of which drivers are comfortable paying for à la carte. He also warned against throwing too many services at a driver at once, noting that they should be relevant, add value and be purchasable in "discrete amounts." (See Verizon: Telematics Needs Software, Standards.)

For more on telematics, check out Light Reading's dedicated IoT content channel.

T-Mobile isn't as established in telematics as its competitors, given that it's only been building up its machine-to-machine business since 2011, after outsourcing it to RacoWireless . Angel Mercedes, T-Mobile's M2M business development manager, said that right now the carrier is focused on offering M2M through partners that are experts in their fields, acting solely as the connectivity provider. (See RacoWireless Opens App Store for the IoT.)

"In the future, that might change, but we're concentrating now on offering connectivity and partnering with companies that do it," said Mercedes, who sports the coolest name in telematics. "At the same time, if a customer comes to us and wants an end-to-end solution, we go get the ecosystem together to provide it."

Sprint does offer an end-to-end suite of connected car services with its Velocity platform, but as far as business models, it's still in the "anything goes" phase. Nina Kim, Sprint's global manager of connected vehicle marketing, describes telematics billing as "one of the lingering questions out there for the industry as a whole." As of now, she sees connectivity and its associated costs as most commonly baked into the cost of the vehicle. (See Sprint Insures Its Spot in the Connected Car.)

"What we've found is [that] the notion of subscriber fatigue is very real, in that consumers don’t necessarily want to keep buying another subscription, whether cable or your phone or this and that," Kim told Light Reading in an interview. Instead, she said the industry is exploring a number of different options, including potentially mobile ads in the vehicle. For Sprint, that's a decision it currently leaves up to its car OEM partners, even if they choose a different network than Sprint.

"We very much have a range of flexibility and connectivity options and connectivity providers," Kim said. "It's determined by finding the right mix that works for the auto OEM, in terms of what services they want to deliver, where and how."

— Sarah Reedy, Senior Editor, Light Reading

COMMENTS Add Comment
scmodi 9/11/2014 | 1:11:32 PM
Keep it simple!!!! Telco plans are already too complicated. Service providers have made them complicated inadvertently (perhaps), but consumers are the losers in the myrid of options and conditions available to them. Shared plan is the simplest concept for tracking and charging consumptions under consumer control. So in my opinion, VZW has got it right so far. Question of advertisement sponsored two sided business model leveraging network and subscriber policies is something that can be introduced on top of underlying simplistic consumotion tracking and charging model.... In fact, applications ecosystem coupled with real time policy orchestration creates options for new business models only limited by creativity of service providers!
Phil_Britt 9/11/2014 | 10:01:36 AM
A la carte better The a la carte model looks better, and certainly would be what I would want if I ever had a connected car -- that time is years off because "new" cars to me are at least 7 years old. There are tons of connected options I would never use.

However, auto manufacturers have been successful in offering and successfully charging for bundled options. For example, GPS is typically included only in higher-priced bundles, which some people will pay for rather than refusing the bundle and buying Garmin or TomTom.
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