Cellular providers eye auto market

  • 23-Aug-2010 09:21 EDT

Cellular service providers want to embed their devices in cars as high growth looms.

Even though the number of vehicles pales in comparison to the number of individuals using cellular service, the automotive industry is becoming increasingly attractive to providers as mobile phones near saturation points.

Vehicles present a huge potential for market growth for cellular. Telematics systems in passenger cars and commercial vehicles are expected to more than double their penetration in the next five years, going from less than 10% worldwide in 2010 to 23% in 2015, according to ABI Research. Many cellular providers view vehicles as a new opportunity.

“Telematics is where future revenue is,” said Fredrik Åkerlind, Telenor Connexion’s Head of Sales for the Americas. “Standard cell phone coverage in Sweden is already at 145%.”

Some providers are establishing operations that focus on the challenges posed by vehicles. “We’ve just set up a new group to look at fields like telematics,” said Maurice Thompson, Director of Open Development at Verizon. “Now that more than 90% of people in the U.S. have a cell phone, one way to gain more penetration is to go into vehicles.”

While basic technologies will remain the same, some changes will have to be made to address vehicle requirements. Pricing models will have to be established, and cellular providers will have to ensure that vehicles will remain in contact when they move between cell towers while streaming data.

“Developers have to talk to us so we know how the systems will work,” Åkerlind said. “Cellular networks are not today designed for services like Pandora.”

The increasing bandwidth of 3G and 4G cellular technologies will help bring drivers and passengers more infotainment options, even streaming movies or games to back seats. However, linking these rapidly evolving cellular technologies to autos will be a challenge.

The auto industry’s long development cycles are dwarfed by the decade or so that the car will be on the highway. There is no consensus on whether telematics hardware should be adaptable over the vehicle’s lifetime.

“I would like to see plug-and-play modules so that when the vehicle’s in for service, you could change the module,” said John Horn, National Director of Machine to Machine Communications for T-Mobile. “Many in the auto industry don’t like that idea; they want the module to be embedded and permanent. They feel if the module’s easy to swap out, someone could pull it out.”

However, he noted that, even if vehicle owners won’t be able to bring the latest services into aging vehicles, they will be able to maintain most, if not all, the telematics services they had when the car was new. All emerging cellular technologies will be able to connect to older hardware in cars.

“Today’s technologies are all backward compatible,” Horn said. “You don’t have to worry about losing connectivity like cars did when the industry went from analog to digital.”

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