Market Drivers

Auto Manufacturers and Mobile Operators

In 2001, consumers were largely unaware of mobile location services, more so in North America than in Europe. Recognizing the incremental revenue opportunities and strategic importance of mobile location services, mobile operators and auto manufacturers have started investing heavily in building the infrastructure to deploy them.

Mobile location services can be divided into two categories: those designed for in-vehicle use and those designed for personal use. Although the applications may be similar at a basic level, the business models, client technology, and service providers are distinctly different. In-vehicle solutions will be developed and provided by the large auto manufacturers and their investments, often as original equipment provided with the vehicle, whereas personal solutions will be developed by mobile operators and deployed on small handheld mobile devices. Both in-vehicle applications and personal applications are likely to leverage partnerships with large media and travel services organizations for a complete and compelling solution.

In-Vehicle Mobile Location Services: Auto Manufacturers

There are a number of forces driving the interest of mobile locations services in vehicles. Consumers in North America are interested in the additional safety they provide in emergency situations. Consumers in Europe are interested in the navigation capabilities they provide. Auto manufacturers see mobile location services as powerful differentiation, an opportunity to improve their relationship with a consumer and generate incremental revenue, and as a tool to collect valuable diagnostics feedback that could reduce the cost of vehicle production. Auto manufacturers typically provide a roadside assistance package with new vehicles, and they see the capabilities enabled by mobile location services as a natural extension.

Auto manufacturers see significant value in improving their long- term relationship with an individual consumer because repeat customers are much more profitable than new ones. One of the best ways to do that is to create an interactive service in the car that provides a two-way dialogue between the customer and the manufacturer. It enhances the driving experience with navigation and concierge services, while at the same time reassuring drivers that they will quickly receive assistance in an emergency.

Because auto manufacturers see this customer relationship (and the customer's driving experience) as core to their business, they are prepared to subsidize the service while the market is developing and business models are still being determined, as shown by OnStar providing limited-time free service to more than 1 million users in North America. Auto manufacturers have invested substantially in independent companies such as General Motors' OnStar (http://www.onstar.com), Ford Motor Company's Wingcast (http://www.wingcast.com), and DaimlerChrysler's Tegaron (http://www.tegaron.com) to deliver their service. OnStar provides branded service for GM cars in North America and Opel (a GM brand) cars in Germany. Tegaron provides private-label service for various models of Mercedes-Benz, Audi, and Renault in Europe. Wingcast had planned to provide private-label service to owners of Ford, Jaguar, Volvo, and other makes, both inside the Ford Motor Company brand portfolio and outside it. Furthermore, most auto manufacturers soon plan to make mobile location services client hardware standard equipment in new vehicles.

In-vehicle solutions have the advantage of being able to leverage the sound and power systems of the vehicle ”a significant advantage over handheld mobile location service solutions. In-vehicle solutions are not restrained by a small form factor, and can distribute their necessary components throughout the vehicle (i.e., GPS receiver in the trunk, central processing unit independent to the faceplate used to control the system, and an optional screen used to display rich color maps). They are also able to incorporate and leverage data such as vehicle velocity and heading to improve quality of the vehicle positioning ”data that is hard to capture in a mobile phone. In-vehicle solutions are therefore likely to be able to provide much richer services that could be bundled with the same unit that provides the vehicle with DVD, TV, and even digital satellite (XM) radio capabilities ”an additional incentive for consumers to subscribe.

Personal Mobile Location Services: Mobile Operators

The forces driving the interest in personal location services are less clear-cut than those driving in-vehicle location services. Because public transportation in Europe is excellent in comparison to most parts of North America and because Europe's dense urban areas often make private transportation an inconvenience (due to traffic and finding parking at your destination), many people don't drive or drive only infrequently. This is in stark contrast to North America, where leaving the home invariably means using a private car. This presents an interesting opportunity to provide personal location-based services in Europe that would otherwise be provided by an in-vehicle system.

Basic services would include multimodal directions, such as the ability to route a user on foot and by subways, trains, ferries, and even private car or taxi when necessary; the ability to locate nearby points of interest that can be reached on foot or via the public transportation network; and basic concierge and safety services. Although these services are of primary interest to Europeans and inhabitants of dense urban areas such as New York, it is possible to imagine a more powerful service that would provide a user with mobility management . This service might provide turn -key concierge services door-to-door for any destinations, including online travel reservations , navigation, personal safety, recommendations based on a personal profile, and even parking and event ticketing.

The challenges facing personal location services are several. The limited power supply and small form factor make rich services difficult to deliver. Mobile operators do not have the same vested interest auto manufacturers have in deploying location services: They are not capturing valuable diagnostics information from cars. Mobile operators already have an interactive two-way dialogue with their customers via Short Message Service (SMS), and are less likely to be in a position to fund free services to win adoption. At the end of the day, it is likely we will see location services as common in vehicles before we see them as common in wireless PDAs and mobile phones. In either case, a business model such as NTT DoCoMo's that enables and encourages third-party application development would allow the fastest development of a mass market.

Government Mandate

In addition to the marketing push generated by mobile operators and auto manufacturers, government regulations are playing a significant role in creating the market for mobile location services. Two instances are the provision of emergency services and the concept of road pricing.

E911/E112

The U.S. Federal Communications Commission (FCC) has enacted a series of orders to improve the reliability and quality of emergency services for wireless users, Enhanced 911 (E911). The requirements are to transmit all 911 calls and location information to public safety answering points without any intermediary validation procedures. All phones manufactured for sale in the United States after February 13, 2000 must provide override processing for 911 calls that allows them to be handled by any carrier regardless of whether they are the subscriber's preferred carrier or not. Additional implementation phases require sending location data with every emergency call and impose specific requirements for the accuracy required for this location information. These initiatives require mobile operators who wish to provide service in the United States to implement some of the most expensive components of a mobile location services architecture.

Europe has a similar initiative called Enhanced 112 (E112), but it is not a European Union mandate and it is fairly loosely defined. Responsibility for E112 is left to national emergency authorities. Although several countries are considering or have implemented mandates , E112 is not the driver for mobile location services that it is in the United States. Rather, European mobile location services are being driven by the value-add of location-enabled applications provided by mobile operators and the automotive sector.

Road Pricing

A second governmental regulation that is likely to impact the market for mobile location services is road pricing. Transportation in general has some negative side effects, including environmental pollution and congestion. Rather than building toll roads and imposing fuel taxes, the concept behind road pricing is to charge for actual road usage based on time, location, and type of vehicle.

The Netherlands has been carefully studying road pricing as a potential solution to their congestion problems. The Dutch government estimates that by 2006, they will have to accommodate 17 million people and 8.5 million vehicles in an area that is 34,000 square kilometers containing 118,000 kilometers of roads. A reference technical architecture called MobiMiles was developed in collaboration with the Dutch government as a potential road pricing solution. On June 6, 2001 the Dutch cabinet indicated in a letter to Parliament that it would begin implementing the MobiMiles system, with national coverage by 2006. The system is expected to receive final political approval in 2002, enter pilot tests in 2003, and begin rolling out in 2004.

The system in the Netherlands will be implemented through a public “private partnership, and will require a mobile location services device to be installed in every vehicle. This unique market force creates an attractive and significant market opportunity. The Netherlands' road pricing system is closest to becoming a significant market force to expedite deployment of mobile location services, but many other communities are also considering road pricing solutions, particularly in densely populated and economically developed regions . Solutions that use simple electronic toll collection are already in use in Singapore, Germany, and the United States.

The comprehensiveness of the Dutch approach will provide the necessary infrastructure to deploy some of the most sophisticated mobile location service applications. Additional details on the Netherlands road pricing system can be found at the Web site of the Dutch Ministry of Transportation, Public Works, and Water Management's National Traffic and Transportation Plan (http://www.minvenw.nl/rws/projects/nvvp/) or at http://www.roadpricing.nl.