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Americans are a mobile society and as car manufacturers look toward equipping vehicles with wireless features

A new term is creeping into our vocabulary, one that encompasses Americans' love for their vehicles and their desire to take advantage of every idle moment that occurs throughout the day. The term is telematics: the ability to provide wireless, built-in computer functionality inside vehicles.

It was only a matter of time before automotive manufacturers, wireless service providers, and the computer industry realized the potential to marry wireless and Internet technologies and automobiles. After all, Americans spend 26 billion hours in their vehicles every year. Those hours translate into potential revenue for automobile manufacturers through value-added safety, security, maintenance, and entertainment services; for Internet companies through online purchases; and for wireless service providers through handsfree phone calling.

But despite the potential of telematics, Americans have not flocked to implement the technology. Why? Telematics is still in its infancy, not yet available in all cars, and has life-cycle, payment, and partnership hurdles to overcome before its true value is understood and considered as necessary as power steering and antilock brakes.

Standard Equipment
Telematics emerged in 1996 when General Motors unveiled OnStar, a telematics service that, with the touch of a button, offered drivers emergency roadside assistance, vehicle theft location, automatic airbag deployment notification, remote door unlock, handsfree voice-activated phone calling, and concierge services.

Using existing cellular networks with added GPS technology, a wireless connection is established between a vehicle and a customer call center to provide drivers with a range of services 24 hours a day, seven days a week. Initially, telematics was available only in high-end vehicles. But today, automotive manufacturers have plans to provide some form of telematics services in all car models by the end of this decade. Strategis Group, for example, estimates that in-vehicle computing will be either standard equipment or an option in 84% of all new cars sold in the U.S. by 2005.

Overcoming Roadblocks
Until then, it's up to car manufacturers to convince drivers that telematics is a must-have option, like power locks and windows, as well as discover the price threshold of how much consumers are willing to pay for ongoing safety, security, and other value-added features inside their vehicles. It's no secret that although today's consumer might initially like the telematics features, paying for them is another issue. While most automobile manufacturers provide tele-matics services free of charge during the vehicle's first year, consumers have tended not to renew the service once the trial period expires.

In part, this is due to the sticker shock associated with telematics. After enjoying the service for free, consumers are unwilling to pay several hundred dollars a year for the same features. The possibility also exists that eventually the safety and security features telematics offers will become standard equipment, even mandated by the federal government, the same way that safety belts and air bags are today. Consumers, therefore, don't see the value of paying for a service today that will come automatically tomorrow, especially when many of those features are replicated by using a standard cellphone already in a driver's possession.

As the value-added features beyond safety and security become more important to differentiate and convince consumers they need telematics services, car manufacturers will need to drive the development of many cross-industry partnerships in order to maintain the momentum and further development of telematics technologies. Electronic payment (e-payment) systems providers, payment terminal manufacturers, software development companies, networking, telecommunications, merchants, and automobile manufacturers will have to come together to expand the telematics services currently available.

Vehicles equipped with a liquid crystal display (LCD) panel to access the Internet and authorize transactions will need to work with Internet ser-vice providers and e-payment providers to incorporate the proper payment authorization and authentication services to ensure that those transactions are secure. Car manufacturers will also need to work closely with computer manufacturers and software development companies to design and integrate computers into a dashboard and ensure the reliability of voice recognition and infrastructure technology.

Once the necessary partnerships are in place, car manufacturers will need to determine a pricing structure to generate revenue from telematics services. Trials currently underway in parts of the U.S. provide a potential revenue stream by allowing drivers to pay for bridge tolls and goods and services at gas stations, convenience stores, and quick-service restaurants with an embedded device in or on their vehicles.

Car manufacturers are eager to integrate these services into their own telematics offerings, realizing that in order to profit from telematics ser-vices, a per-transaction fee must be established. This type of pricing structure could be similar to how telecommunications companies charge consumers for each phone call placed. The end result will be that car manufacturers will need to work closely with a host of nontraditional players to the automotive industry. These entities include wireless service providers to document calls made, Internet service providers to document the sites visited and for how long and what purchases were made, as well as work with brick and mortar merchants, such as gas stations, that also enable wireless payments for goods and services.

A final roadblock to overcome is the life cycle difference between vehicles and telematics technology. Technology advances far more quickly than the frequency by which consumers purchase cars. Therefore, car manufacturers will need to overcome the challenges of making new telematics applications and services backwards compatible with existing services in older vehicles.

Drivers of Consumer Demand
Despite the challenges ahead, telematics is and will continue to be a viable industry. The American Automobile Association predicts that the number of telematics subscribers will increase from 1 million in 2001 to nearly 17 million in 2005. Similarly, UBS Warburg estimates that by 2010, telematics will be a $47-billion industry worldwide, up from just $4 billion in 2001. Several factors point to the fact that these estimates will indeed become reality.

Over the next 10 years, Generation Y, those born between 1977 and 1994, will add a total of 71 million drivers to the road, the largest group of consumers since the Baby Boomers arrived between 1946 and 1964. Generation Y is tech-savvy, maturing side by side with the Internet, cellphones, e-mail, and instant messaging. They aren't intimidated by technology and expect it to continue to mature in order to make their lives more productive and manageable. Telematics applications will satiate their need to be more productive as voice-activated calling and computer functions such as e-mail become available in their vehicles.

The societal demand that cellphone use be banned while driving is also forcing the development of telematics and sophisticated voice-activated applications. New York was the first state to ban cellphone use while driving, and more than 40 other states are considering similar measures.

The advancement of Bluetooth technology, which provides a wireless connection between hardware devices, such as a vehicle to a cellphone, as well as 802.11a/b are playing significant roles in providing solutions to the changing cellphone habits mandated through state governments. Bluetooth and 802.11a/b technologies will enable the synchronization of cellphones and other handheld devices such as PDAs to vehicles' telematics systems.

This will enable handsfree, voice-activated dialing and access to personal calendars through simple verbal commands. The reality of this technology is here today as, last January, both Palm and Motorola, Inc., announced the integration of Bluetooth technology into their respective handheld devices. Motorola's handsfree phone system, especially designed for vehicles, places a Bluetooth-enabled car kit consisting of a speaker, microphone, and control panel into a car's dashboard. By simply starting the vehicle, the system is activated and drivers can make calls with their regular cellphones using voice commands.

This enables drivers with older vehicles not equipped with telematics technologies to take advantage of today's cellphone capabilities and realize the importance and necessity of telematics features. In turn this lays the groundwork for when this same driver purchases a new car: he or she will hopefully make a decision based on telematics capabilities and continue the service once the trial period expires.

As the concept of integrating Bluetooth and 802.11a/b technologies into home appliances matures, vehicles could also become a gateway for drivers to talk to their "smart homes," turning on lights, starting the coffee maker, or opening the garage door, while blocks away from home. Another benefit of this synchronization process is that an individual's cellphone or PDA will work with any vehicle equipped with the same technology. Thus drivers and passengers will have the same telematics capabilities with their cellphones or PDAs regardless of the vehicles they are using.

As voice-to-text and text-to-voice translation technology improves, cellphones and PDAs offering Internet connectivity will also provide drivers with audio text messaging and e-mail capabilities. Improvements to this technology also provide the opportunity for car manufacturers to safely embed computer screens with Internet connectivity into vehicle dashboards, allowing drivers to talk to their in-car computers rather than relying on passengers to navigate the Web.

The deployment of the 3G wireless telephone network, which provides Internet capabilities to specially equipped wireless devices at higher connection speeds than experienced through today's existing wireless networks, will also play a role in furthering telematics. With 3G networks, consumers will be more apt to use their cellphones or PDAs to access the Internet. In turn, as those devices become integrated with Bluetooth technology and are linked to vehicles through systems such as Motorola's car kit, consumers will experience easy-to-use, safe, and fast in-vehicle computer capabilities.

Telecommunications network providers Verizon, Sprint, Lucent, and AT&T intend to deploy their 3G networks in areas throughout the U.S. by year's end. In January, Verizon announced the deployment of its 3G network in the San Francisco Bay area, Salt Lake City, and in an area that reaches from Norfolk, Virginia, to Portland, Maine. Thirteen more cities followed in April and by year's end, the service will be available in 75% of the country.

Americans are a mobile society and as car manufacturers look toward equipping vehicles with features that also make Americans more productive, telematics is poised to provide the services and features demanded by today's drivers. Whether those services are the ability to obtain stock quotes, purchase gas, ask for directions, or provide a specific location for an emergency vehicle, telematics is enabling vehicles to emerge as the next-generation mobile PC.

About Levent Koralp
Dr. Levent Koralp is the founding editor and publisher of Ulitzer's "Fast Cars Magazine" and "Fighter Jets Journal."

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