Connected car telecoms: what might the role look like?
With the automotive industry moving ever closer to collaborations with the computing technology industry, where do the telecoms companies fit in? What could be the role for telecoms players, especially those who pride themselves on their “connected car” lines of business? We can all see what the OEMs, Apple, Google, Sync/Microsoft are getting up to – but the role of the telcos is not always so visible.
Well, we will certainly be up and downloading more data. Nearly all of that data will be transmitted via mobile 3G and 4G networks. This growth in data usage is inevitable once we get used to our connected cars and/or tethered smartphones streaming rich media, such as map updates, Google Streetview in the car, streaming audio or net radio. Imagine when the kids in the back start playing social, connected games in the back of the car! We know these things can get quite addictive and use up a lot of bandwidth and data. Whilst some of this data might use the smartphone’s SIM and dataplan, in-car WiFi and embedded m2m are both increasing sharply.
Connectivity costs and charges
I admit to a feeling of deja vu. We have been here before with the entry of the Smartphones. Back then, it was Apple/iPhone (then Android) that did all the heavy lifting to really drive usage of data upwards – and this will probably be the case again. What do I mean? Well, once iOS in the car and Google’s open auto alliance really get traction, expect to see an explosion of apps which get used in the car environment. More apps mean more data usage.
So, the telcos could see good returns driven simply by more data usage; they could sit back and just see connectivity consumption rise. But there could be snags:
- Can the networks cope, and how much capital investment is required to ensure that?
- Can the network operators get the commercial strategy right? This will be dependent on the right charging model and pricing strategy.
Let’s assume the network development is going to be OK (a big assumption, but it will make this analysis easier!). So, this means the charging model and pricing will become a challenge. However you look at it, this will probably mean they must charge for the extra data usage in some way.
The first question is: who will the telcos charge? The user/consumer or the automotive OEM?
If these data costs were charged to the OEM, the OEM would then embed their costs into the vehicle or service pricing structure. I think that some OEMs will want to move away from that model, even though some of them have adopted it initially. When we are only talking about a few megabytes a month, an OEM can absorb that cost somehow – but when usage gets higher, they just won’t want to do that.
So, that leaves the telco left with the option of charging the user/consumer.
One approach which has been discussed a lot by telcos is an “indirect” model, i.e. a model where data costs are “embedded” in the costs of services they enable. e.g. a streaming audio service is priced so it includes connectivity. Or a roadside assistance service which uses telematics might include the costs of the connectivity that service uses. I can’t see this kind of “embedded” pricing taking off though; it’s too complex, not transparent to the user, and service providers won’t bite on that concept much.
More likely is that the user/consumer would be charged directly in ways which look more like some of the telcos current charging schemes. This may be on pay as you use or contract basis. Likewise, charges could be based on cost per megabyte or cost per session. Users often prefer session or flat rate pricing, especially when they are concerned about costs getting out of control. Such flat rates could be part of a annual plan, or for shorter “sessions”, for example charging per hour or per day or whatever.
Getting the price right
Users’ behaviour and expectations are still shaped by experiences with their home and work broadband services, where massive amounts of data are consumed, providing us with our cherished content services whenever we choose. So, if flat rate contract or session-based pricing is where this is going to end up, the telcos must ensure they set the price right: low enough to represent perceived value for the user, but high enough to make money from providing the service. Getting this balance right hasn’t always been easy for telcos, who have been caught out in the past with smartphone data flat rate pricing, which have sometimes been set too low to be worth it for them.
More than “just connectivity”?
If you talk to a telco, very few of their executives like the idea of being pigeon-holed as providers of connectivity. They want to be broader service providers, adding “greater” value, which they believe means additional services, leading to more differentiation and better returns. We know that the smart telcos, like AT&T and Deutsche Telekom have invested a great deal in networks, platforms and services relating to the connected car. These networks and platforms offer more than just connectivity to OEMs and app developers and content providers alike. Just look elsewhere on this site (see Resources) for a taster of some of the APIs already available to enable app/service developers to do more. There is much more to come on this, and telcos could use their scale to provide more compelling offers to a small developer (more on this in a blog to come). AT&T and Deutsche Telekom are already deeply engaged and primed to nurture the eco-systems on both the digital and automotive sides and will be extremely well placed to benefit from the improving relationship. And that is clever, since these moves offer synergies to efficient network usage.
Even if telcos can’t get their “smart-network” and added value service acts together, they will continue to benefit from the connectivity surge (so long as they can charge for it). We know that the device guys have often disparaged network operators, but for quite a while, we are all going to need bandwidth and spectrum. That means telcos are a fundamental part of the connected car eco system, however you want to look at it.