WIth thWith the latest tale of navigation devices gone bad (http://bit.ly/4W90kQ), one is forced to ask this question. How does one know if the maps (and navigation) on a particular device are any "good?" With more, not fewer, companies creating navigable maps, this question is more critical than ever. And the race to bring less expensive navigation devices and systems to the market has opened the door to alternative soutions. Maps used to be the sole domain of companies such as Navteq and Tele Atlas – and a few dozen other companies around the world – that actually drove and physically surveyed the roads at the ground level. These companies added layers of detail and higher degrees of accuracy as time progressed. These maps weren’t perfect and they still need regular updating, but they established a high enough expectation with consumers that millions of people were willing to buy navigation devices and faithfully follow them into, in some instances, into ponds and to incorrect destinations. Now, Google has gotten into the truck driving game along with companies such as Facet Technology. OpenSourceMaps (OSM) and CloudMade have introduced crowd-sourced maps as has Waze. GeoEye has brought satellite-sourced Google Earth to life. And Intermap is creating road data based on airplane flyovers. With the first OSM-based PND due in Germany in Q1, and Google decoupling from Tele Atlas in the U.S., and Audi showing Google Earth-enhanced navigation in the 2011 A8, is the value of road-driven maps being diminished? Device makers and consumers will soon be forced to decide for themselves what constitutes a good enough map. As 2009 fades into 2010 it is suddenly unclear whether Navteq and Tele Atlas will maintain their status as the gold standard for mapping or whether individual alternative mapping approaches or some combination will create a new industry standard. Navteq's recent agreement with Microsoft suggests the company will make a rigorous defense of its market position in pursuit of proliferating location-based market opportunities. Tele Atlas' ace in the hole remains the TomTom Home application with its community-based map correcting and updating. Hopefully 2010 will bring fewer tales of people driving into ponds.

Audi's announcement of an optional Google Earth-enabled navigation system for the 2011 A8 due in mid-2010 has raised a question for competitors: To 3G or NOT to 3G? Having just put a messy transition from analog to digital technology in the rearview mirror, the automotive industry is facing yet another key point of inflection between 2.5G, 3G and 4G wireless technologies for embedded telematics solutions. Several automakers have already taken some preliminary decisions leading down the 2.5G path for their future telematics platforms focusing on safety and security. The belief is that additional functionality can be handled via the customer’s smartphone – and that the primary function of automotive telematics remains automatic crash notification and, perhaps, navigation. Some OEMs are targeting the wider spectrum of location-based applications with their related revenue opportunities enabled by 3G technology. And QNX and Alcatel-Lucent have partnered to prepare the market for a 4G LTE future. It is worth noting that QNX is a strategic partner with Audi as is Elektrobit, both of whom are developing cloud-based, location-based solutions for cars. Big decisions await the industry in 2010. Car makers will want to avoid the cost of a 3G module. They will also want to avoid the cost of data plans, hoping to tag along on the customer's data plan via a physical or Bluetooth connection to the smartphone. This strategy will work in the short term, but Audi is one OEM pointing the way to a 3G future with its announcement of a Google Earth-enabled navigation system for the 2011 A8. Initially built around a GPRS/EDGE platform, the car maker has announced its intention to bring UMTS on board. This decision will put Audi into the telematics forefront where it can be expected to be joined by Mercedesand BMW. The key to success will be leveraging location-based technology to deliver a superior value proposition to the driver. With 3G, the full spectrum of content and services and related business models will be at the company's disposal and not dependent on the capabilities of the customer's smartphone or a flaky Bluetooth connection, though Bluetooth will have a role to play. Ford will have the sexiest solutions at next week's CES event in Vegas, but Audi has served notice that it is stepping into the telematics ring and will be a contender. By this time in 2010, the luxury segment may have a new technology leader.

The latest connected portable navigation device from Best Buy, the Insignia NS-CNV43, is both groundbreaking and disappointing. The device introduces Twitter posting of destinations – an industry first - and maintains the Google Search feature of the original Insignia connected PNDs, while adding other connected content services for weather, gas prices, and movie listings. But despite its virtues and advances some vital ingredients are still missing and in a head-to-head comparison to an embedded navigation system in a BMW, the Traffic.com sourced traffic data appears to be inferior to the Inrix-enabled ClearChannel Total Traffic Network data in the BMW. At $149.99 (list: $199.99), the feature rich NS-CNV43 makes a powerful value statement in a Best Buy department crowded with 20+ devices mainly from Garmin and TomTom and including units intended for hiking and boating. The device has haptic touch feedback and Bluetooth phone connectivity, unusual features in a relatively inexpensive PND. (Surprisingly, the device does not allow for voice dialing or voice destination entry, limiting the attraction of the Bluetooth.) (For details on other PNDs and connected PNDs: http://bit.ly/7Zgw7V.) Improvements on the original connected PNDs from Best Buy, introduced more than a year ago, include an improved windshield mount and text-to-speech. (Nuance has replaced Loquendo.) The Google Search function, alone, is an attractive proposition, but the addition of other content services and Bluetooth make the device a standout. (The Lithium-ion battery included with the device is described as having a two-hour capacity, but in the tester’s experience was capable of lasting less than half an hour and gave repeated low battery warnings almost immediately after being disconnected.) The two biggest shortcoming in the new device relate to the routing software and traffic information – elements critical to its performance. From a routing standpoint, the device delivers the user to the anticipated destination in most cases. But while testing the device in Detroit recently, the NS-CNV43 appeared to fall victim to a Michigan left turn on a divided local highway, putting the user in an endless loop or “make a U-turn” instructions half a mile before reaching the destination. This failure was reminiscent of several similar malfunctions experienced with the original connected Insignia PNDs which are built around deCarta software. (The device also does not display the current speed limit, which is a popular, though-often inaccurate, PND feature) Just as important as routing acumen is the integration of traffic data. Reliable traffic data is critical to determining both arrival time and the quickest route. On two recent journeys the NS-CNV43 appeared to be outperformed by the embedded navigation system in the BMW, against which it was being tested. On a trip to FedEx Field for a Monday night football game working through a combination of rush-hour and pre-game traffic, the Insignia-branded device was unhelpful and appeared lost relative to the unerring guidance from the on-board system. Similarly, navigating rush-hour and holiday traffic to a dinner engagement, the BMW was able to find a back road, avoiding a local highway jam to which the Best Buy device appeared to be committed. Following the guidance of the BMW navigation, the tester arrived at the restaurant ahead of a second car that had a 10-minute head start. All in all, the connectivity of the Best Buy device is attractive and the Twitter function is fun, although probably only practical in limited circumstances. Of greater concern is the longer term cost of the device. The NS-CNV43 comes with a free three-month subscription to the Insignia Internet connected services – and includes the warning: “Insignia reserves the right, at it’s (sic) discretion, to limit excessive data usage on any device.” One of the attractions of the device is that its box promises: “On-demand connected services – no monthly fee required.” What this means is that when the free access to connected services expire they can be purchased on an a la carte, as needed-basis directly from the device. According to a CNET review, as few as three days of service can be purchased for $4.99 or as much as 12 months for $99, with various increments in between. In Summary The new device has improved TTS and an industry-first Twitter function along with Google Search, connected content, Bluetooth and Traffic.com data. The low $149.99 retail price is somewhat offset by the cost of on-demand subscription services that are more expensive than offerings from TomTom and Garmin. Best Buy is making progress, but has more work to do in refining its portable navigation offering and integration of Traffic.com data or the data itself appears to be inferior to ClearChannel Total Traffic Network data.

As Strategy Analytics anticipated, the market for digital maps has quickly shifted in the wake of Google’s entrance into turn by turn navigation. In the contrast to Google’s recent announcement to pull away from Tele Atlas as its primary map supplier, Microsoft (MSFT) and Navteq have entered into a “new chapter” in their ongoing partnership in what has been deemed as “a true 'win- win' for both companies” as stated in a recent press release.  While by no means a merger, the implications of this partnership could prove to be extremely far reaching.  Microsoft and Navteq/Nokia have technologies which extend into computer software, computer operating systems, mobile software operating systems, search engines, mobile hardware, and automotive platforms as well as the wealth of location-based data owned by Navteq.   This may prove even more significant as Google has recently leaked its intention to expand into the mobile hardware market. The most immediate benefit will be the use of Microsoft technology to create 3-dimensional, street level maps, which MSFT calls Streetside, for its Bing Beta Maps.  As more PNDs become connected, the ability to house 2D/3D maps onboard while storing street level maps off board will be an important selling point and help to differentiate PNDs from mobile phone navigation.  Street view maps are a fun application, but lack the accuracy for reliable automotive navigation.  Developing a seamless way to switch from street views to more accurate 2D/3D maps will help PNDs to better differentiate themselves from smartphones as PNDs provide better automotive usability. The growth of the connected PND market and smartphone navigation solutions can be seen in Strategy Analytics’ recently updated database listed below: Portable Navigation Multi-Feature Device Specification Database In addition to achieving better quality maps, Navteq has strengthened its position by gaining greater access to consumer markets for smartphones and connected PNDs, and could benefit from Microsoft’s strong position in the automotive market, especially in terms of volume cars equipped with Ford SYNC or Fiat Blue&Me and a system that is currently in the works with Hyundai.  While Google is a company with massive resources and a proven ability to flawlessly execute plans, perhaps the strength of its position in automotive and LBS has been overstated by many in the industry. Garmin should benefit from its close relationship with Navteq, while Tele Atlas/TomTom needs to evaluate its future and ponder potential strategic partnerships of its own.   Although Tele Atlas/TomTom has said that it will continue to focus on accuracy and innovation, these words seem more like hollow executive speak than a signal that Tele Atlas/TomTom believes its business model is still functional.  TomTom’s recent decision to slash the price of its iPhone application in half, from $99 to only $49, seems to belie assurances that everything is alright at the Dutch Company. In terms of Microsoft, the partnership helps Bing better target the mobile and automotive search market that Google seeks to dominate.  Strategy Analytics recently detailed Google’s competitive position in the report:  Competitive Position Analysis of Google in the Automotive Market Google has not been shy about its wishes to dominate mobile and automotive search, in fact, at Navigation and Location 2009 in San Jose, CA, a representative from Google stated, “it is advertising, not navigation that we are after.”  This makes search a vital component for deriving revenues from LBS solutions.  Microsoft is prudently looking to bolster its position against Google’s rapid push into LBS by partnering with Nokia. As reported here, by Telematics Update, the new Bing Maps will include a free voice-enabled search application, allowing the driver to access maps, directions, and traffic without compromising the wheel of their car.  The hands free application will cue the driver will visual signs rather than audio responses, thus giving Microsoft a potentially more powerful value proposition to potential advertisers as well as a solution that drivers may prefer. Still, the battle for dominance in automotive and mobile phone search is just beginning and long battles often make for strange bedfellows.   Google’s decision to pursue mobile phone hardware is certainly going to upset the likes of Motorola, who were relying heavily on the success of Android based phones.   This comes on the heals of pulling away from Tele Atlas and offering free TbT on Android, a platform on which Garmin is building navigation-centric Nuvifones.  While Google’s slogan, “don’t be evil”, may continue to resonate with consumers, these moves may have engendered distrust with potential strategic partners.      With many major players have yet to weigh in including automotive OEMs, Google may be viewed as too ambitious for potential partnership.      Meanwhile, Apple, a darling of many consumers, has yet to fully weigh in, but has not ignored LBS quietly acquiring Placebase last July.

QNX Software Systems has more or less quietly taken control of the luxury car market for embedded infotainment operating system software and, increasingly, application-level software in the head unit as well. The month-long, nationwide tour coordinated with Alcatel-Lucent to show off the now-famous LTE-enabled Toyota Prius has sent a clear message that QNX has tomorrow's automotive infotainment solutions ready today. The LTE implementation shows QNX at the peak of its game. In fact, QNX and Microsoft virtually pushed VxWorks out of the automotive operating system market and the two are virtually unchallenged aside from M-itron, which is dominant among Asian OEMs. Could QNX be poised for further gains or is the company's position more vulnerable than it seems? The demonstration of the LTE car, most recently featured at the Rock Financial Showplace in Novi, Mich., reveals an in-dash system with two front-seat screens along with back-of-headrest screens for rearseat entertainment. As a concept demonstration, the vehicle of course violates existing limitations on frontseat, in-dash video, but the point is that virtually any kind of audio, video or game content is available via any screen each of which can be personalized to the passenger in that position. The basic options displayed in the demos are Games, Communications, Internet,  Entertainment, Vehicle and Navigation. Of course, these six choices could be whatever the developer prefers and users are able to customize the sub-directories as they would radio stations. For example, within Internet the options include: Chumby, Browser, Fanbase, Home Control, Internet Video, Kabillion, Weather, YouTube, QStore, Pandora and Local Search. A similar rich mix of options is available under vehicle where QNX has realized the vision of the virtual user manual with vehicle schematics tied to on-board sensors. And, of course, QNX has enabled several on-board application stores. There are several implications to the QNX design. First of all, the system is a cloud-ready solution. A vehicle equipped with the QNX software is location aware, capable of tapping into the Internet for its information needs or the information needs of the driver and/or connecting with the driver's phone to access contact or scheduling information. Secondly, the QNX system shows how comprehensive connectivity almost completely obviates the need for a call-center-type telematics service provider. The driver can access almost anything he or she needs via voice commands and the vehicle, with appropriate software enhancement, is capable of anticipating or responding to most requirements. Lastly, the LTE demonstration is a warning to auto makers that emerging network deployments may be closer than they appear in their rearview mirror. Verizon says that by 2013 its LTE network deployment will be equivalent to its 2009 3G deployment - ie. nearly ubiquitous. Those modules may be expensive, but they're coming fast and those prices will fall correspondingly. Enabling this level of functionality is QNX's so-called abstraction layer of software for Alarms, Audio, SOS, Phone, GPS, Net and CAN. This abstraction layer acts as an interface between the embedded systems and the application layer. The applications "subscribe" to the objects in the abstraction layer which receive their updates from the embedded software. The only bad news for QNX is that this LTE solution is ill-suited for the volume segment of the automotive market. While QNX has taken charge of the high end of the market, the high end of the market is characterized by low margins and low volumes. Microsoft, another contender for luxury segment business, has made a name for its self in the volume segment of the market where both margins and volumes are superior. The question facing QNX is whether it can leverage its high-end success with mass market solutions. Given the fact that it is already well positioned with relationships with key players such as Hyundai and Volkswagen prospects are positive. But with a swarm of small cars hitting the market it is likely that Microsoft is better positioned to benefit the most from emerging opportunities. In spite of the elegance of the LTE showcase, QNX is an industry shark that needs to find a way to swim like a minnows. If there is a segment(s) on the rise it is A/B.

 

 

Clarion has reported receiving high marks for its factory-installed, voice-activated navigation system with Sirius Travel Link in the Lincoln MKS. The company says its system ranked highest in J.D. Power and Associates’ 2009 Navigation Usage and Satisfaction Study and the system in the Ford Flex is second on the list. Navigation systems in five Ford and Lincoln vehicles earned five of the top 10 positions, according to the company.

 

The announcement is significant for several reasons including the fact that the contract with Ford was won by Clarion just two or three years ago – long before the automotive industry meltdown was ever dreamed of. It is also important because the Clarion navigation systems are available on more than 15 Ford vehicles and Ford is showing the most visible success in the marketplace among the Detroit Three.

 

The news is not only important to Clarion, as the market moves into a recovery phase, it is also important to Sirius Satellite Radio and other Ford partners including Microsoft. It shows Ford’s increasing clout in a market littered with downturn casualties.

 

The downturn in the auto industry robbed Sirius of its major growth engine - new car sales. In its most recent earnings report, Sirius had surprisingly positive yet still modest good news. Reported revenue of $629.6M increased 2.75% year over year. Subscriber revenue, representing 93.3% of total revenue, rose 2.64% year over year. Net advertising revenue declined 30.5% year over year. Equipment revenue declined 18.3% year over year.  Net additions of new subscribers were 102,295 subscribers, or 0.6%, on a sequential basis, vs. a net loss of 405,181, or 2.14%, year over year. The company ended the quarter with a subscriber count of 18.5M.

 

Churn, defined by Sirius as the monthly average of self-pay deactivations for the quarter divided by the average self-pay subscriber balance for the quarter, was 2% in the quarter and 2.1% year-to-date. This compares with 1.7% in the third quarter of 2008. The conversion rate, defined by Sirius as the percentage of subscribers that receive Sirius service and convert to self-paying after the initial promotion period, was 46.8% in the third quarter of 2009 vs. 47% in the year-ago quarter. For year-to-date 2009, the conversion rate was 45.3% vs. 49.2% in the first nine months of 2008.

 

The average revenue per user, derived from adding both subscriber and advertising revenues then dividing that total by the average number of subscribers, was $10.87 vs. $10.51 a year ago. ARPU has averaged $10.67 for the first nine months of 2009, a 1.3% increase year over year.

 

The company faces continuing market, technology and content challenges including its contract with “shock jock” Howard Stern (expiring in late 2010), future infrastructure investments and competition from technologies ranging from Internet radio, podcasting and automotive Wi-Fi and Bluetooth connectivity to the impact of sun spot activity on service over the next few years.

 

The success of Ford and Clarion does make for strange bedfellows, though as Ford’s Sync technology may present one of the most immediate competitive threats to Sirius should Ford decide to deploy the Internet radio capability it demonstrated at last year’s Consumer Electronics Show.

 

Until its Ford win, Clarion was probably best known for its work for Nissan and Infiniti. Here, again, Ford’s success is a boon to both Clarion and its partners including Zenrin for map content and Nuance for voice technology. Ford’s success has thrown off additional accolades for many of these suppliers contributing to their success on other platforms and with other suppliers. Sirius, for example, has just announced that Mercedes will add Sirius traffic to its 2010 model year vehicles.

 

The success of the Ford system has a lot to do with its user interface which includes an enhanced, touch-enabled display with high contrast and company-specific colors and graphics. It is also noted for the performance of its voice recognition system. The combined solution is a powerful on-board and connectivity-enabled system that continues to receive high scores from consumers and serves as a model for the industry.

TeleCommunication Systems (TCS) has announced that it has entered into a definitive merger agreement to acquire Networks In Motion for an aggregate of $170M. The merger consideration will be paid in a combination of cash, TCS common stock and promissory notes. Networks In Motion's Board of Directors has unanimously adopted the merger agreement and recommended its approval by Networks In Motion's stockholders. The acquisition accelerates TCS' position in enabling mobile operators to offer enhanced location-based data services. The move by TCS reflects the relatively quiet success achieved by Networks in Motion and TeleNav and a couple of other companies in building a highly profitable business around a combined base of approximately 20 million+ subscribers to navigation applications for mobile phones. The $170M valuation also helps TeleNav which is approaching an initial public offering. The announcement is potentially bad news for Google which recently entered the smartphone navigation space with its free turn-by-turn navigation application for Android-based phones. NIM's relationship with Verizon will likely result in Verizon-only capabilities being leveraged in the market, such as probe-based traffic data, which Google will be unable to match due to its much smaller base of users. According to Strategy Analytics estimates, Android-based smartphones will represent approximately 10% of all smartphones in 2010, but only a subset of these will be compatible with Google's TbT application and only a subset of these will actually download the application. Nevertheless, the navigation on smartphone business opportunity has again proven to be more significant than originally thought, now representing a market worth, in total, as much as $2B. Much of this value is deriving not only from the application subscriptions but also from the sale of additional "premium" content, such as traffic data, or updates within the applications, not unlike other profitable application segments, such as on-device gaming. In the end, carriers are more likely to support navigation partners that provide a path to profitability from subscriptions and in-application sales versus free applications such as Google's Tbt offering. So, while Navigon will continue to dominate the iPhone navigation segment and Google will increasingly rule the Android world, a combined TCS/NIM will grow stronger via its relationship with Verizon. Of course, TCS/NIM will also benefit from offering a more fully evolved and acceptable navigation solution relative to the Google offering. http://www.networksinmotion.com/newsroom/12_01_2009_TCS_acquire_NIM.php-Lanctot