Monetising the connected car – the telco perspective

Automotive World talks to Vodafone’s Matt Key about the growing number of opportunities that vehicle connectivity presents to the telecommunications industry. By Martin Kahl and Freddie Holmes

Your cell phone service provider may not be the first name that comes to mind when thinking of the connected car, but the rise of the Internet of Things (IoT) and vehicle connectivity is already bearing significant fruit for the telecoms sector. As Vodafone’s Chief Executive, Vittorio Colao, stated back in May 2015: “We’re clearly betting on automotive.”

But what role does a telecommunications company – or ‘telco’ – play in the connected car space? “Being a great telco involves providing great network coverage and service levels,” says Matt Key, Commercial Director, M2M at Vodafone. “We view the IoT as collapsing into four different environments – and one that a telco knows very well is the device.”

Incidentally, reliable network coverage and service are vital factors to the success of one of the most significant consumer devices of them all – the connected car.

Growing use cases

Of particular interest to a telco is seamlessly connecting various environments together with the car, be it the home, office, or entire city. “If you are listening to Spotify and leave the office, you want to get into a car that knows you have a Spotify account. From here, what you were last listening to transfers into the vehicle because it knows you’ve got the rights. That’s quite an interesting services area for a telco to be supporting,” observes Key.

You can derive data and then infer knowledge about how the vehicle is performing – whether the brakes are working, fuel consumption is alright, and acceleration is in line as planned. From that, you can feasibly optimise the performance of the vehicle.

However, along with expanding in-car connectivity for entertainment purposes, OEMs have been investigating how to leverage basic telematics services for vehicle monitoring. Once a car is connected, valuable driving information can be sourced and analysed either by a third-party company or by the OEM itself. “You can derive data and then infer knowledge about how the vehicle is performing – whether the brakes are working, fuel consumption is alright, and acceleration is in line as planned,” explains Key. “From that, you can feasibly optimise the performance of the vehicle.” Vodafone is currently working with more than 70% of European OEMs to this end, notably BMW, Jaguar Land Rover and Daimler.

OEMs are also beginning to look outside of these uses cases to evolve the way they manage the relationship with their customers and provide new end-to-end services. This is all geared toward improving customer satisfaction, but ultimately customer retention “and perhaps new revenue lines,” says Key.

Monetising the connected car

Data has been referred to as the most powerful currency in the automotive industry, and volumes of data are set to grow exponentially. The connected car could emit up to five terabytes of data in a single hour, according to one Tier 1 supplier, but the challenge lies not in how to harness this data, but how to monetise it.

Along with utilising driving data for usage-based insurance (UBI) purposes – where safer, more efficient drivers are rewarded with lower premiums – Key believes there exist other opportunities for revenue. One such example is driver health monitoring: a handful of Tier 1 seating suppliers are investigating the area of ‘smart seats’, which use built-in sensors to gauge heart rates, stress and overall wellness whilst driving. With consumers rarely captive for such an extensive period of time, the opportunities to leverage the car as a source of monetised data has not gone unnoticed.

It takes a series of capabilities on top of just being a great telco to offer these end-to-end services

“If you spend 30 to 45 minutes in the car on the way to work every morning and evening, a number of providers have been talking to us about how they can use that time to run a quick ‘health check’ on an individual in the car,” says Key. “It’s really interesting to see that the car is going to become the next iteration of that kind of environment.”

Stolen vehicle recovery is another end-to-end service that Vodafone and other telcos operate. In August 2014, Vodafone acquired Cobra, which is now consolidated as Vodafone Automotive. Cobra provides a range of end-to-end services including UBI and a secure operating centre – a manned 24/7 service for stolen vehicle recovery, vehicle tracking and crash reconstruction services.

“We realised it takes a series of capabilities on top of just being a great telco to offer these end-to-end services,” Key notes. For example, all Porsches feature Vodafone devices that allow the vehicle’s location to be monitored. If the car is stolen, Vodafone can liaise with the end customer and emergency services in “pretty much any country” he advises. “We bought in that capability because these were services OEMs were identifying as new business cases and revenue models for them to differentiate themselves against the competition.”

The fifth element

In-car Wi-Fi is offered as an option in an increasing number of new vehicles. However, while most consumers envision an ‘unlimited data’ experience akin to public or home broadband, this is not the case with connected cars. For example, GM’s OnStar package features 4G long-term evolution (LTE) connectivity and turns the car into a Wi-Fi hotspot. Passengers can check email, stream media and play games as they would do at home or on the go. The first three months or 3GB of data – whichever runs out first – is included with the purchase of the car, but after that a monthly or one-off data plan needs paying.

Referred to by some in the marketing industry as ‘The Fantastic Four’, quad-play brings together broadband Internet, television, telephone and mobile services. With consumers faced with potentially paying five separate bills, could a form of ‘quad-play+1’ – with the connected car as the fifth element – be a viable concept to consolidate payments into a single attractive package?

If you spend 30 to 45 minutes in the car every morning and evening, providers have been talking to us about using that time to run a quick ‘health check’ on an individual in the car

“That is certainly going to be one of the options,” says Key, “but there are very different segments in the automotive market, as there are in any market, which depend on geography, brands and the nature of the customer in the vehicle. We’re configuring ourselves to offer all of those as a menu of options to OEMs, depending on how they choose to go to market,” he adds. “Perhaps it could be offered in certain geographies where they are used to this kind of ‘bundle’ voice and data plans. It would be sensible to have an option to consume Internet in the car as part of that bundle.”

Would consumers want to pay separately for vehicle connectivity? It depends, says Key. “It’s horses for, and I think all the OEMs are testing different models. We’re comfortable offering that as a menu of options, because from a mobile perspective, we find people in some territories much prefer prepaid. Others like to post-pay, bundle or separate it out, and we’re working with OEMs to offer the range of options they feel is going to be best suited to their customers for those particular segments.”

Cyber security ‘top of mind’ for telcos

An increasingly important area for the automotive industry to address is cyber security, but there are varying approaches to securing the connected car: slow down and wait for standards to catch up, or plough on and address risks as they arise? The industry is asking the same question, as yet without a firm answer. The number of hacks that have gone public can still be counted on one hand, but even one breach of a connected car needs to be taken seriously.

I can see the connected car becoming a pretty standard option from most OEMs in the coming few years

In July 2015, a Jeep Cherokee’s Uconnect-based infotainment system was hacked from ten miles away. The fact that a vehicle could be remotely controlled in the first placed sparked concern, and a UK-based Nissan Leaf being hacked all the way from Australia in early 2016 underlined the ease and breadth of connected car vulnerability.

Is automotive cyber security something to be concerned about, or does the industry have a handle on it? “It’s top of our mind at the start of everything we do,” says Key. “All of the telecommunications companies see it as a major priority because their credibility is on the line as much as the automotive industry’s. When you get into offering these kinds of services, you need to make sure that [the car’s security] works, it’s safe and it’s secure.”

Connected services have been on offer for a while now, particularly in high-end vehicles, and connectivity is now increasingly being offered in the mass market as a way to provide new services to new customers. “I can see the connected car becoming a pretty standard option from most OEMs in the coming few years,” concludes Key.

This article is part of an exclusive Automotive World report on connected cars. Follow this link to download a copy of ‘Special report: Connected cars

Close
Close