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Finding the Value in Transportation Telematics

Danny Dicks | Analyst
Heavy Lifting Analyst Notes
Danny Dicks | Analyst
2/28/2014

Wireless network operators are keen to build their machine-to-machine (M2M) businesses, and they see opportunities within transportation to develop services that could take off as cars become connected and public transportation systems use technology to improve services as costs reduce.

Some telematics services, such as fleet management and logistics, are long established, and a competitive service market has developed with many small and medium-sized players serving specific niches, often on a country-by-country basis. While there is scope for consolidation in this market, the thin margins mean wireless operators are likely to look for a larger prize.

Their eyes are on the nascent markets for private car telematics services. But this market also has issues that must be understood. Telematics platforms in private cars can indeed deliver multiple services: road safety, vehicle/road taxation, insurance services, vehicle diagnostics and remote system upgrade, stolen vehicle tracking and traffic monitoring and data gathering are just some of the applications. But it is not easy to see which services will generate significant revenue, and for whom. There will be consumer reluctance to paying for many of these services, or even aversion to allowing some of them, for personal privacy reasons. It will be instructive to observe how these location-tracking issues play out in the wider world of smartphone applications.

But in some markets -- notably in Italy, the UK and US -- usage-based insurance is starting to gain some traction, after a slow start, and wireless operators are developing services to support this industry (based on their M2M platforms and in conjunction with specialists). Further, telematics platforms, once in place, can also deliver infotainment -- and that's looking like one of the major opportunities for connected car proponents. Traffic information, other location-based information, navigation and access to entertainment via an in-car device rather that a mobile phone are all possible revenue-generating services.

Wireless operators are looking into these options -- some are building their expertise internally, often with the help of specialists (Vodafone, for instance, has a usage-based insurance solution based on its M2M platform and built with US risk consultancy Towers Watson); others are buying it (Verizon bought Hughes Telematics in 2012). They all know there's something to gain -- but they are far from the only companies with the capability to deliver telematics platforms.

It's not at all certain who will emerge as the dominant players in private car telematics, but wireless operators do have a reasonable chance to emerge as service providers if they put in the effort to think carefully about where the revenue will come from, and work with partners to build superior platforms.

The Heavy Reading Mobile Networks Insider report, "Telecom Opportunities in Transportation Telematics & ITS," examines the physical and commercial relationships between different aspects of connected transportation, including vehicle telematics and broader ITS. It looks at the different communications technologies that can be used for different applications, with a special focus on the connected car. It examines ways that value can be added in telematics and ITS through solutions, platforms and services, and the companies that are delivering that value. Finally it profiles 12 leading companies in different positions in the market, describing their product and service offerings.

— Danny Dicks, Analyst, Heavy Reading Mobile Networks Insider


The report, Telecom Opportunities in Transportation Telematics & ITS, is available as part of an annual single-user subscription (six issues) to Mobile Networks Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.heavyreading.com/mobile-networks.

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Joe Stanganelli
Joe Stanganelli
3/3/2014 | 4:32:19 AM
Re: A lot going on here
One of the benefits of Toyota's "Friend" system is that it notifies drivers if there has been a recall, or even if there is another issue with the particular car detected.  It will the driver when a visit to the dealership is necessary.  Pretty neat stuff.
mendyk
mendyk
3/1/2014 | 8:22:30 AM
Re: A lot going on here
Yes, and maybe Toyota can also work on a connected application that cuts down on the number of serious vehicle recalls it has to issue. But old stereotypes die hard.
Joe Stanganelli
Joe Stanganelli
2/28/2014 | 11:30:10 PM
Re: A lot going on here
This has become more a concern in the US given that, in the wake of NSA revelations, our privacy hackles are up.

But we still continue to give up privacy and freedom in exchange for security theater (for instance, this year, the Boston Marathon will not allow US veterans to run with their packs in tribute of their fallen comrades, because terrorists), so I'm sure the trend will continue.
Joe Stanganelli
Joe Stanganelli
2/28/2014 | 11:27:32 PM
Re: A lot going on here
Japan seems to be more ahead on this than the US automakers are (surprise, surprise).

Toyota, for instance, has been working on social media where you and your car can "friend" each other and chat with each other.
mendyk
mendyk
2/28/2014 | 12:55:29 PM
Re: A lot going on here
Ford and GM both had connected cars on display at MWC, though Ford's demo didn't seem to be working. Weird to have two automakers at the show while Apple and Microsoft choose not to participate.
Carol Wilson
Carol Wilson
2/28/2014 | 10:41:39 AM
A lot going on here
AT&T and Sprint have also made big investments is telematics for the automobile industry, and along with VErizon, they are looking well beyond usage-based insurance. There are advantages to auto dealers - tracking car info to alert drivers to needed maintenance and using GPS to track missing vehicles -- and even parents who want to geo-fence their teen drivers. 

Interesting space to watch, to be sure. 
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