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Connected Cars: Tether Today, Embed in 10

The majority of connected cars on the road today are likely getting online via the driver's smartphone, but embedded connectivity is on track to become a standard feature over the next 10 years.

The ability to allow consumers to tether their smartphones to the car will be the biggest driver of the connected car space over the next 18 months, according to new research from Heavy Reading . However, in a separate report, Analysys Mason suggests that 90% of all new cars will have embedded connectivity by 2024. (See MNOs Need to Get in the Driver's Seat.)

Both reports could certainly be right. The reality is that the connected car space is a hotbed of excitement right now, but connectivity, business models, and app considerations are still being worked out as the industry figures out what consumers want, how they want it, and what they'll pay for.

"For now, built-in options might provide stronger connections, but consumers overall prefer tethering their existing smartphones to cars via Bluetooth or USB cables so they can have full access to their personal contacts and playlists," says Denise Culver, an analyst at Heavy Reading and author of its report.

In Analysys Mason's forecast, 48% of cars in the world will have embedded connectivity by 2024, and 48% of car owners will be able to pair their smartphone with their vehicle's infotainment system. Consumers may begin to expect their in-car experience to align with their out-of-car life, the analyst firm says, meaning they'll want access to all their apps anywhere they go.

That said, Culver says that how manufacturers address the issue of how many apps to introduce is still in flux, as well. They (rightfully) have concerns about security and reliability, so they aren't willing to open their car doors to every app out there. (See Finding the Value in Transportation Telematics, Nokia Pumps $100M into Connected Cars, Apple CarPlay Puts Siri in the Driver's Seat, and Are Connected Cars Creepy or Cool?)

"Most auto manufacturers will want to maintain control over developers, while also limiting the number of apps available in the car," Culver says.

This means that operators will have to be flexible in how they bill for in-car connectivity -- whether it's by app, a data add-on, part of a bucket (for which AT&T Inc. (NYSE: T) is angling), or built into the cost of the car. Right now, most are figuring out what business model resonates the most with consumers while working through regulatory and safety concerns. (See AT&T Makes GM Cars a Data Plan Add-On, Volvo: AT&T HSPA+ Can Drive My Car, and AT&T Tests Drivers' Desire to Pay for LTE.)

"User-friendly service packaging and subscription models are attracting growing numbers of consumers to connected car solutions, even as car manufacturers, OEMs and governments develop strategies for how connected cars can improve safety and communication on the roads for the future," Culver concludes in the report.

— Sarah Reedy, Senior Editor, Light Reading

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