Wireless operators are turning cars into big mobile hotspots, but the question they are now grappling with is: Are their customers willing to pay for them as if they were mobile hotspots?
AT&T Inc. (NYSE: T), for one, is counting on it. The carrier is lending its 4G LTE network to Audi's new A3 sedans and is offering customers two ways to pay: a six-month plan for $99 and 5 GBytes of data or a 30-month plan for $499 and 30 GB of data, both after a six-month free trial. Come this summer, AT&T customers will be able to add their cars as another "device" on their Mobile Share data plans and keep tabs on how much data they've consumed each month. (See Audi Taps AT&T for In-Car LTE, AT&T Ups the Stakes in Connected Cars, and AT&T Beefs Up Connected Car Efforts .)
The data plan will give drivers access to Audi Connect services, including navigation, music streaming, and the wide world of the Internet from their dashboards. Audi has offered 3G connectivity on a monthly basis in the past and says it found that drivers preferred to pay in six-month or 2.5-year plans. (See Euronews: Vodafone Connects With Audi, VW.)
Whether or not customers will cough up for the service at all is up for debate, however. New research from Heavy Reading suggests that consumers are reluctant to pay for many connected car services and are even averse to others, for personal privacy reasons. But Danny Dicks, Heavy Reading analyst and author of the report, "Telecom Opportunities in Transportation Telematics & ITS," believes Audi drivers may be more likely to pay for connectivity based on how AT&T has structured the billing. (See Finding the Value in Transportation Telematics.)
"I think AT&T’s shared data plan idea is a good one. Adding the car connectivity won’t seem like adding a whole new subscription -- just adding another 'family member,' which probably looks like a better value to most drivers," Dicks tells Light Reading.
In general, however, Dicks believes that both connectivity and incremental services might be hard to sell a smartphone owner who has free apps or existing paid-for apps that can do something close to what’s being offered on the telematics platform: "The connected car idea needs to demonstrate real utility that can’t be replicated over existing devices and connections."
Audi and AT&T's service is similar to one Volvo has been offering with Ericsson AB (Nasdaq: ERIC) for the past few years, Volvo OnCall, which it rebranded at CES to Sensus Connect. The service comes with connectivity free for 12 months with a new Volvo, followed by a subscription, and includes infotainment features such as music streaming and restaurant location, roadside assistance, safety features, and -- a popular one in Sweden -- the ability to remotely heat the car before getting in.
Dicks says that Ericsson has had to find the services that work for Volvo, which happen to primarily be mashup style infotainment apps, but that operators might find luck looking into other opportunities for monetizing connected cars that have nothing to do with the driver or passenger.
For example, he suggests revamping traffic system modeling, which depends on accurate information about vehicle movements. It's currently an expensive and time-consuming process to collect this data via roadside surveys or automatic license plate recognition technology that ends up not always being accurate.
"But connected vehicles can generate just the sort of data the transport modelers at highway agencies and local government authorities need -- so there should be a business model there," he says. And, if operators own the SIM on which the data is collected, this could be a good opportunity for them, too.
It's still early days out on the connected road, but it's the area of machine-to-machine communications that is attracting the most interest from operators, and the opportunity will become more significant when the ROI issues are worked out. AT&T's subscription service with Audi will be a good test of consumers' willingness to pay in the US.
— Sarah Reedy, Senior Editor, Light Reading