Consumers will pay for in-vehicle wireless

NEW YORK -- American consumers are willing to pay for wireless services in their cars that enhance driving and vehicle ownership, according to a new report on telematics by Jupiter Media Metrix, a global firm in Internet and new technology analysis and measurement. 

The Jupiter Consumer Survey shows that despite a high $400 upfront cost for equipment and installation, 44% of consumers would pay for a basic telematics service focused on safety and security, and nearly half would be willing to purchase a premium service package that includes navigation assistance, automated business locators and office communications applications such as e-mail and voicemail.

Despite a presently small base of telematics subscribers in the US of less than 2.5 million, telematics presents a highly contextualized environment in which to reach consumers. Jupiter says that telematics providers must automate services, relax subsidies, improve renewal rates, and up-sell subscribers in order to break even. Nonetheless, rationale for automotive manufacturer initiatives will extend to include noncash incentives, cost savings, and customer retention opportunities.

Wireless value chain

"Telematics presents a new wireless value chain that combines content and services with a unique in-vehicle delivery infrastructure," said Jay Horwitz, Jupiter Research analyst. "With roughly 170,000 new subscribers each month and about 17 million new car sales annually, this represents a large future market."

Although the challenges of deploying telematics are becoming evident -- notably, unclear demand and high equipment costs -- the fundamental benefits of a mature market remain sound. Telematics provides automotive manufacturers with new customer retention opportunities, non-cash incentives for buyers, and a rich data set with which to create operational efficiencies. Telematics provides wireless operators with new customer acquisition strategies and incremental minutes of use. 

The 43-page Jupiter report, entitled In-Vehicle Applications: Telematics Enables Contextual Services & Operational Efficiencies, says that the new mobile technology fits into three segments:

▪ Personal services that address generic mobile needs including communications, information retrieval and entertainment (i.e. digital audio broadcast from Sirius Satellite Radio and Sprint PCS Single Voicemail).

▪ Driving services that address safety and security needs that arise while driving (i.e. OnStar's automatic collision notification and Wingcast's proposed gas station locator).

▪ Vehicle services that address vehicle ownership needs and take into account state and diagnostic variables (i.e. NetworkCar's OnBoard Technician).

"While telematics is an important sector for key stakeholders such as automotive and wireless operators, companies in industries such as travel, financial services, media and consumer packaged goods also stand to benefit," Horwitz said. "By reaching consumers in the vehicle, companies can present timely and relevant services that consider location, day-part and modality."

Top five services

According to the survey, the top five vehicle-based wireless services consumers would be interested in using include: navigation services (45%), emergency services (44%), remote monitoring (36%), stolen vehicle tracking (33%) and personalized driving information (30%). By incorporating contextual information -- such as speed, location and mileage -- these services address consumer demand for greater control and security, and improve car owners' ability to maintain their vehicle.

Consumers expressed significantly less interest in personal, or generic wireless services, such as automated business finder (18%); e-mail, calendar, voicemail (12%); personalized content (6%) and live concierge (5%). 

Consumer demand for in-vehicle wireless services has been rather low. However, the new Jupiter Report reveals a growing trend in the opposite direction: 

"Telematics providers must automate services, relax subsidies, improve renewal rates and up-sell subscribers in order to breakeven. By keeping drivers connected, it represents an opportunity for automotive OEMs to squarely address the motivations guiding vehicle ownership and purchase decisions -- mobility, convenience and comfort," Horwitz said.

Vehicle data

Jupiter analysts have found that vehicle data collected through telematics services can be used to create operational efficiencies and improve design performance up and down the automotive value chain. By consolidating and analyzing rich, real time driving and auto diagnostic data, OEMs will realize new operational efficiencies in streamlining transactions, directing service revenues to dealers and offsetting warranty costs. In the absence of subscriber revenues, this information will unlock new sources of revenue from automotive suppliers looking to benefit from information transparency and sharing.

The impending launch of services from Sirius Satellite Radio (Sirius) and XM Satellite Radio (XM) -- in the wake of high-profile failures of Iridium and Globalstar -- has focused attention on the viability of digital audio broadcast (DAB). 

Satellite radio

Jupiter concludes that the in-vehicle environment is an important outlet for audio programming because it presents a large and captive audience. Even though terrestrial broadcast radio dominates, companies such as Sirius and XM Satellite Radio are attempting to create subscription services for high-quality audio content. Additionally, telematics service providers such as OnStar, ATX, and Wingcast present avenues for premium weather, entertainment, and news media. 

Media companies can extend the reach of their content to vehicles -- a highly contextualized interactive environment. Car rental companies have already begun to experiment with tracking and navigation systems, but telematics presents an opportunity to improve their product offerings and customer service.

For this study, Jupiter designed and fielded a survey in February 2002 to online consumers selected randomly from consumer panels. A total of 1,961 individuals responded to the survey. Respondents received an e-mail invitation to participate in the survey with an attached URL linked to the Web-based survey form. The samples were balanced by a series of demographic and behavioral characteristics to ensure that they were representative of the online population.