Telia Wants Driving Seat in Connected Car Biz

DUBLIN -- IoT World 2016 -- Telia's launch of connected car services this month represents the Swedish operator's biggest move into a new business area in about ten years, says Hans Dahlberg, the vice president of Telia Company's global Internet of Things (IoT) business.

That move, the significance of which Dahlberg likens to the launch of TV services, also puts the telco at the intersection of dealings between end users and car service companies, shifting Telia Company (formerly TeliaSonera) out of its traditional connectivity role. "We are helping companies translate data into new services -- there is a big difference between that and simply moving megabytes from one address to another," says Dahlberg during a conversation with Light Reading at this week's IoT World conference in Dublin.

Figure 1: Hans Up for Connected Cars Telia's Hans Dahlberg describes the Swedish operator's launch of connected car services as its biggest move in a decade.

The service, which is being offered under the Telia Sense brand, allows car owners in Sweden to access a range of connectivity and other services through Telia. After plugging a dongle into the vehicle, customers can buy connectivity packages and choose from a menu of services provided by Telia's enterprise partners. At the moment, there are just four, covering inspection, insurance, repair and roadside assistance, but the list is set to grow fast, says Dahlberg. Service expansion will also take in other countries in Telia's Nordic and Baltic footprint, he adds.

This is not Telia's first maneuver in the connected car space. Like operators in other markets, Telia has provided connectivity services for car makers such as Tesla, whose hi-tech vehicles have been described as "smartphones on wheels." But the entry into the "retrofitting" game is obviously targeting a much bigger addressable market with a different service proposition. "It is a double-sided business model -- handling the enterprise part and also addressing the end consumer," says Dahlberg. "This is the first time we see the value of data not only in terms of the communication of data."

Partners may see various attractions in working with Telia, besides a major channel to market. To deliver its service, the operator has teamed up with a software-as-a-service company called Springworks, in which it now holds a 30% stake. The startup's Spark-branded cloud platform underpins the entire offering and supports services like usage-based insurance and remote diagnostics.

Spark can also aggregate data from connected vehicles and feed this back to insurance and other companies, giving them information of considerable value to their businesses. "We are working with one of the big insurance companies in Sweden, and they reckon if they could lower speeds by an average of 3-4km/h they could reduce the number of collisions by 15-20% and road deaths by 40-60 per year," says Dahlberg. The company he refers to is Folksam, Sweden's biggest insurance provider, Light Reading has learned.

Telia has devised revenue-sharing models for different business cases, ranging from transaction-based schemes to ones based on subscriber numbers. Taking advantage of the Springworks technology, it can also sell customer data to its partners, provided the customer has given it permission. "An insurance company would pay a fee to the telco for the data they get, the customer would get a discount from the insurance company in return, and the insurance company could better align risk with driving behavior," explains Erik Ramberg, the CEO of Springworks. "It's a win, win, win."

Next page: Driving ahead

Driving ahead
Predictably enough, Telia is giving nothing away regarding its targets for customer adoption and revenues, but Dahlberg is bullish. "In terms of customer take-up, it is substantial," he says, when asked what kind of growth Telia can achieve. "And this is a big part of the IoT pie when it comes to revenues."

As with other service providers, IoT still accounts for a small (undisclosed) percentage of revenues at Telia, but it could become what Dahlberg calls a "gap filler" for the top line, which is under pressure from various forces. In its July-to-September quarter, the company flagged a 0.9% fall in net sales, to about 21.5 billion Swedish kronor ($2.3 billion), compared with the year-earlier quarter. Service revenues in Sweden, where it serves about 6.2 million mobile customers, fell by 1.4% over that period, to about SEK8 billion ($860 million), because of weak demand for traditional fixed-line and enterprise offerings.

Happily, operators have found they can charge more for automotive services than other connectivity offerings in the IoT business. Dahlberg reckons average revenue per user is about ten times more in the connected car market than for other IoT services. But he also says Telia needs to be at the center of the ecosystem, and not just a connectivity provider, if it is really to thrive. The holy grail is to provide a "bridge" between different types of IoT services. "When you link the smart car with the smart home and the smart city is when you'll get most value out of IoT," he says.

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Not everyone is convinced operators are in the best position to play this unifying role. For some analysts, systems integrators like Accenture stand a far better chance of succeeding here. Yet Dahlberg believes Telia's expertise and existing relationships give it the edge. "I think we're better positioned because we are used to handling data and lots of enterprises are already customers today," he says.

The experience of providing and billing for mass-market service offerings could certainly help Telia to support enterprise customers whose business models are also in flux. Facing digital challenges of their own, various product companies and manufacturers are transforming into service organizations -- selling cubic meters of compressed air, say, instead of actual compressors. "Most customers struggle on how to distribute and bill for these kinds of services," says Dahlberg. "Even though they have these ideas it is hard to go into the IT stack and actually do something."

Telco diversification has not always gone according to plan, of course, but there are good reasons to be optimistic about Telia Sense given the momentum in the connected car market. While some car makers have been trying to play the central role in this space, most would struggle to build a local ecosystem of services given their limited presence in specific national markets. For an insurance company like Folksam, for example, integrating with Telia must have looked far more straightforward than engaging with dozens of different car makers. But as other European telcos map out their connected car strategies, much will be riding on Telia's test drive.

— Iain Morris, , News Editor, Light Reading