As recognition in the industry grows regarding the importance of crowd-sourced traffic information, the race to build or acquire the biggest crowd has taken hold. Weighing in for the struggle ahead are RIM, Google, Nokia, Telenav, TomTom, TCS/NIM, Inrix, Waze, Telmap and just about any other organization with access to the GPS feeds associated with connected mobile devices. Crowd-sourced data is not simply passive GPS data feeds. By crowd-sourced information this analyst is referring to ACTIVE information inputs from traffic observers feeding live reports of incidents and traffic jams. This is the new frontier in traffic information and traffic information providers are still building the tools to capture and integrate these inputs. (The Holy Grail will be a connected traffic solution with in-dash display showing crowd-sourced updates of hyper-local traffic conditions - certainly within the realm of the possible with existing technology.) Navteq is the latest player to join the fray with its acquisition of Trapster, the speed camera location company built upon nine million downloads of its application for reporting speed camera locations. Reportedly battled over by five other bidders, Trapster has attracted a substantial following potentially putting it ahead of TCS/NIM, with about five million probes, but behind Telenav, with more than 17 million. Of course, the challenge for any vendor of crowd-sourced information is the need to get users to turn on and actively use the application. If people are not actively navigating or otherwise sharing their location information – a power-hungry proposition – then the network is, in reality, only a fraction of the total user population. Nevertheless, crowd-sourced information is the next frontier and it has a role in everything from POI information and evaluations, to social networking and, now, traffic. The information is so important to obtain, that companies such as Waze have created elaborate games and reward systems for participants, and tools are usually put in place for identifying trusted data sources and flagging unreliable ones. The key to the success of any traffic system or service, though, is scalability. While crowd-sourced models are interesting – tantalizing even – the question the service provider eventually must face is whether or not they can be scaled. Waze has demonstrated its ability to scale across multiple geographies, although this has spread the current population of three million participants too thin to be reliably useful in all locations. Inrix has enabled crowd-sourced inputs for the U.S., which are being shared with Dept. of Transportation traffic centers, but has yet to extend the platform globally. TomTom’s Live Services application for its connected PNDs currently boasts hundreds of thousands of users, but the solution is built on a standardized and scalable platform that the company is extending – slowly but surely – to the U.S. and Asia from its European base. The GPS-based crowd-sourced data from TomTom PND and embedded PND users will enhance the company’s already cutting edge HD Traffic solution. As it seeks to stake its own claim in the crowd-sourced traffic data sweepstakes, Nokia Navteq will need to define a global traffic service solution, applicable in all geographic markets and capable of leveraging Nokia Navteq’s unique strengths and customer relationships. Just as Inrix, for example, has been able to launch 18 standardized traffic products deployable across any geography, Nokia Navteq needs to build out its traffic portfolio as part of its own effort to set as high a standard in traffic data as it has established in mapping. The race is on.* *Editor's note: OnStar and Apple are notable for their absence from the current roster of crowd-sourced traffic competitors. Nothing appears to be standing in the path of either organization entering the crowd-sourced traffic game. OnStar could no-doubt use the value enhancement to its existing traffic services. Apple, along with the major wireless carriers, has left this value proposition to third parties for now. Stay tuned. http://bit.ly/dLWMJK - Time for Nokia to Take Over Traffic Strategy - Lanctot – Automotive Multimedia & Communications Service

SAIC brought its InkaNet embedded telematics system into the market earlier this year at the Beijing Auto Show under the Roewe brand. The system is now available in dealer showrooms and it is opening eyes to the possibilities around innovative telematics solutions in China and elsewhere. The ability to deliver location-aware advertising is one capability worth a closer look especially for its potential to subsidize telematics services. The InkaNet system was created with the assistance of Pateo. The founder of Pateo is also the founder of Energy Source, which is an advertising agent established in 2001. The functionality of the system, described in literature distributed in Roewe dealerships, includes a wide-range of location-relevant applications and services. While the system does not explicitly state this objective or capability, the description of the system suggests it may well be the first automotive system (in China) able to deliver location-relevant advertisements. If so, it is not unlike the service deployed in New York City cabs by Creative Mobile Technologies. Fitted for rearseat viewing by taxi passengers, the Creative Mobile Technologies solution is able to use GPS data to determine when and where ads are shown in the rearseat. The system also enables credit card payments and CMT has started to release data regarding the kinds of information passengers have requested from the system by day of the week, such as news, weather, sports, business, Zagat or People Magazine. New York’s taxi commissioner commented in a recent NYTimes article that in lieu of demanding advertising revenue, the city hoped that the additional income for vendors might encourage them to lower the fees they charge to cab owners, which could in turn reduce the pressure to increase fares. The only current player in the telematics eco-system offering the prospect of sponsored content or services is Pioneer Electronics with its Platform for Aggregation of Internet Services (PAIS). Pioneer has made clear that this social networking oriented system, enabled through a smartphone connection or an embedded module is built around a revenue sharing model unmatched in the industry. As Google and Bing bring their browser battle to the automotive segment, the opportunity for sponsored search or other subsidized content in the car is on the table. (Will Baidu offer sponsored search for connected cars in China?) And ClearChannel’s iHeartRadio Internet radio service deal with Toyota Motor Sales could include some advertising or promotional element. It is worth noting that one of the most successful connected services delivered to cars – as measured from a profitability standpoint, is Sirius XM. Sirius and XM bought their way into dashboards which eventually led to positive cashflow. Maybe it’s time for more content and service providers to pay up. InkaNet is showing the way. NOTE: The InkaNet system is not without its shortcomings. For further details: http://tinyurl.com/2b5vbvx - Enter, the Dragon: China Getting Its Moment on the Telematics Stage - Lanctot - Insight – Automotive Multimedia & Communications Service http://bit.ly/gWT4QX - Automotive Electronic Design Heads East - Kevin Mak - Automotive Electronics Service

Next week American Honda Motors will introduce its 2011 Odyssey at the Los Angeles Auto Show. The car comes equipped with what the company calls FM Traffic. This seemingly innocuous announcement marks a shift in the industry with wide ranging implications for both automotive radio and on-board traffic information.

Auto makers are confronting major decisions regarding content delivery to the car and the configuration of the center stack. The battle lines for content delivery divide over the question of embedding a telecommunications module or connecting the driver’s smartphone. Smartphone connectivity shifts the data plan burden onto the driver, while embedding allows wider latitude for vehicle data collection by the OEM.

The radio is the beating heart of the center stack and here a struggle is unfolding between and among traditional AM/FM technology, HD Radio, satellite radio and Internet radio. The battlelines are drawn over content delivery, personalization, localization, monetization and flexibility. Honda’s FM Traffic is based on RDS-TMC, a free (to the consumer) traffic data service delivered over the FM sideband. RDS-TMC represents the state of the art in North America for delivering accurate and timely information on traffic conditions. The Honda solution is unique in that it is supplied by the Broadcast Traffic Consortium (BTC), a nationwide group of broadcasters allied with Navteq.

The industry will have to wait until next week to see how Honda has implemented incident and flow messages, but it is likely that Honda and its supplier, Alpine, have added value to the traffic reporting proposition (http://automobiles.honda.com/traffic/). Alpine will also be bringing the BTC RDS-TMC solution to its aftermarket products. Honda is only the second North American OEM to deploy RDS-TMC from BTC, following Mercedes-Benz. More are expected.

The dominant RDS-TMC supplier in North America is Clear Channel, which is partnered with Inrix. The Clear Channel solution is offered by BMW, Volvo, Mazda and a few other OEMs. Honda’s decision is significant given that the company also offers Sirius XM’s NavTraffic service, which requires a monthly subscription. But Honda’s choice reflects several hard truths for the industry:

Truth #1 – The value of traffic data is declining. Once valued at $1/user/month, traffic data has declined in value to 25 cents/user/month or less at the supplier level. For the consumer, traffic information is perceived as free – especially since so much of it is readily available over radio and television broadcast sources as well as from Depts. of Transportation via the Internet. RDS-TMC traffic information is also free (to the consumer) and, therefore, fits this model and mindset.

Truth #2 – RDS-TMC traffic data is better than good enough. Anyone who has used RDS-TMC-equipped navigation systems in a heavy traffic corridor can attest to its accuracy and reliability. Satellite radio traffic information, by comparison, is not competitive – based on this analyst’s experiences. (Some European RDS-TMC data, Germany in particular, is the exception to this.)

Truth #3 – Traffic information services continue to evolve and improve and service providers must evolve along with them. While HD Radio deployment of TPEG traffic data services will be the next step, it will be followed quickly by solutions based on smartphone integration and, ultimately, embedded traffic data platforms that provide for Internet connectivity. All of this is bad news for Sirius XM. The company is already wrestling two alligators – a transition of existing Sirius users to XM service by 2016 (see http://bit.ly/bIWHJ6) and the introduction of Satellite Radio 2.0 in Q4 2011 (see http://bit.ly/bqiU7F).

While managing these two processes, the company is also justifying its existence on a quarterly basis before its investors as a public company.   Traffic data services are key to Sirius XM because they represent the most successful telematics service the company has been able to deliver. Unfortunately, because of the capacity limitations (traffic data for all cities must be delivered down a single connection leading to data being left out due to capacity limitations or delayed due to the carousel-like data transmission) and one-way nature of the satellite pipe, Sirius XM traffic is poor.  

In fact, Sirius XM traffic, based as it is on Navteq’s Traffic.com, has given Navteq’s data service a bad reputation – through no fault of Navteq’s. (This is not to be confused with the city-by-city audio traffic broadcasts provided by Metro Traffic.) Honda’s selection of BTC RDS-TMC is a shot in the arm for Navteq’s traffic team which is looking to bounce back from its reliance on Sirius XM.  The subscriber volume for satellite traffic has been poor as a result of the poor data. Some OEMs do not even offer satellite traffic for their satellite radio systems. This points to a wider problem for satellite radio. The company has yet to find a successful model for branching out beyond talk and music.  

Both Sirius TV (Chrysler) and TravelLink (Ford) are seen in the industry as failed services due to low subscriber volumes. Of course, the business models were also flawed. Sirius TV only offered three channels of rearseat entertainment, a fatal limitation, and most of the TravelLink services – for parking or inexpensive gas – are available on smartphone apps.  Now Sirius XM is setting the stage for Satellite Radio 2.0. In a report to LibertyMedia shareholders last month, CEO Mel Karmazin tipped his hand a bit by referencing the possibility of transmitting local movie times and/or red-light camera info to drivers via satellite radio. He also mentioned enhanced time-shifting technology, presumably from storing or buffering some satellite content.  Other reports regarding Satellite Radio 2.0 suggest more sophisticated search functions for finding particular artists or songs that may be playing at any given time across the voluminous satellite radio dial. Some industry sources say SR 2.0 is expected to have 25% more capacity. It’s not clear whether any of these SR 2.0 possibilities are true, possible or even compelling to future subscribers. 

But Karmazin has a compelling story for investors. He told them last month that OEM penetration of satellite radio as a percentage of new cars was 60% and that the number of satellite radio factory-enabled vehicles in operation in North America was approximately 30M and on a path to hit 80M by 2015. For this reason, the company is continuing to promote certified preowned vehicle programs for satellite radio re-activation – which is seen as a key to future growth.  Karmazin further notes that Sirius XM has some of the lowest subscriber churn in the media landscape (1.8%), has one of the largest subscriber bases (19.5M, second only to Comcast), and now captures 15% of overall radio revenue ($2.8B) vs. $15B for terrestrial radio, and ~$1B for Internet radio/music services. He also notes that satellite radio’s subscriber revenue is $2.8B vs. ~$300M for Internet radio which translates to per subscriber revenue (annual 2009 est.) of $136 vs. $1.25/user for Internet radio and $10-$20/listener for terrestrial radio. 

Conclusions  It’s worth noting that Karmazin made no reference to either HD Radio or to Sirius XM’s stated transition to XM by 2016. While the present looks promising for Sirius XM in the form of rising vehicle sales and the launch of new certified pre-owned vehicle programs, the long-term outlook is less rosy.  The wider deployment of competing and free traffic services should put the last nail in the coffin of Sirius XM’s telematics ambitions. Embedded telematics services and smartphone connectivity, combined with FM- and HD Radio-based solutions, will obviate the need for any Sirius XM data services.  A new front end to Sirius XM’s audio content will provide a short-term lift in allowing for easier access to specific types of music. And premium sports and personality content remain a demand wild card and, combined with nationwide reception, preserve the satellite value proposition.   But car makers are still not likely to integrate satellite radio into the core of their center stack platforms, meaning satellite radio will remain an add-on, particularly given ongoing system upgrades. In a matter of years, cars will be shifting to Internet connected solutions allowing for personalization and location awareness, two propositions with which satellite radio cannot compete. Additional insights: http://bit.ly/dniNxa - Navigation Heuristic Evaluation: Telmap5 – Schreiner – Automotive Consumer Insights http://bit.ly/95NCoW - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority – Blight – Automotive Multimedia and Communications Service http://bit.ly/dtRE5C - Automotive Telematics Services: Shifts in Pricing and Monetization Expected – Canali – Automotive Multimedia and Communications Service http://bit.ly/bwdwcW - Connected Vehicle and Vehicle Device Connectivity System Database by Feature, Region, and Price 2010 – Canali – Automotive Multimedia and Communications Service http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles – Canali – Aumotive Multimedia and Communications Service http://bit.ly/deumcd -# Traffic Data Quality Will Determine #Telematics Winners - Lanctot - blog - Strategy Analytics

Mercedes-Benz recently launched its annual Winter Event, shortly after concluding its multiple-year legal confrontation with ATX, according to industry sources. The Winter Event includes an offer of 36 months of free mbrace telematics service for buyers of Mercedes-Benz vehicles who use Mercedes Benz Financial services and runs through January 4, 2011. Neither Mercedes nor ATX chose to comment on the report. The official statement: "ATX and Mercedes Benz jointly filed a statement (on Oct. 27) with the court that the lawsuit has been resolved. The companies have put together a process to allow for continued service to those Mercedes-Benz owners who wish to continue to receive services through their Tele Aid devices (at the consumer's discretion). We consider it a privilege to provide connected vehicle services to over 200,000 consumers with Tele Aid devices." ATX is the existing service provider for the Tele-Aid telematics service. Hughes Telematics is the new telematics service provider for the (renamed) mbrace service which includes a smartphone app platform. Both ATX and Hughes have been competing for new and existing telematics customers and will continue to do so. Details of the current situation were previously reported here: http://bit.ly/aCiL6T.  It is likely that ATX, currently in the process of adding new OEM accounts such as Toyota, is seeking to project a more non-confrontational image in the industry. The resolution frees up Mercedes to project a more consistent marketing message including, at some point in the near future, advertising that will incorporate mbrace. To date, OnStar has been the only auto maker describing telematics services in mass media messages. Interest and demand can be expected to grow in North America as more car makers launch embedded and smartphone-based telematics systems. Europe is also seeing the first stirrings of eCall compliant deployments. Additional Insights: http://bit.ly/aWhNuC - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/9QCIVw - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Datatables - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights

The battle is on to capture the most and the most accurate traffic incident data on a global scale. Several strategies are being deployed to collect this information including traditional journalistic traffic reporting and a growing variety of technology-based solutions including GPS-based probe solutions or GPS Floating Vehicle Data (GFVD) from smartphone and connected PND makers and carriers to cellular network-based probes (CFVD), video cameras, mobile phone camera probes and crowdsourcing. GPS-based probe data networks are particularly popular with companies ranging from TomTom and Nokia to Inrix, Google and RIM. The significance of the emergence of probe data is the fact that any organization with connected devices, applications or vehicles on the road is a candidate for delivering probe data. The industry is facing a proliferation of probe data sources encompassing everyone from Waze, Skobbler and Navigon to OnStar, TeleNav and TeleCommunications Systems. The CFVD crowd includes TomTom, AirSage, iTIS Holdings, Cellint, Intellione, TrafficCast and a few others. The inaccuracy of probe data, GPS or otherwise, is stimulating interest in license plate scanners, tolling networks and Bluetooth roadside scanners from companies such as Bluetoad. In fact, TrafficCast has already deployed or received approval to deploy Bluetoad scanners in 20 states. The Bluetoad technology with its range of up to 200 feet picks up signals from passing Bluetooth devices which have become nearly ubiquitous in mobile devices. The beauty of Bluetooth scanners is that they can precisely identify both the roadway and speed, making them ideally suited to creating flow data. The downside, of course, as with all sensor-based sources, is the high cost of deployment – usually borne largely by local DOTs who gain access to the data – and the not infrequent failures to which they are prone. Of course, all of these solutions are only really able to act as proxies for identifying incidents as they can only identify the results and not the causes of backups. That is where cameras and observers and journalistic data from companies such as Clear Channel, Westwood One and Navteq’s Traffic.com come into the picture. Two years ago this analyst was a strong believer in the power that video could bring to the traffic data reporting and interpretation game. When I met the team at TrafficLand I came to believe that I had found the ultimate solution for the driving public: show people what the traffic disturbance is rather than tell them. TrafficLand had – and has – a near monopoly on DOT traffic camera installations, but its real value add is managing those images on the back end. TrafficLand not only captures most of the data but it also serves it up to handheld devices and Websites and, soon, to automotive head units. Alas, a lot can change in two years. Cameras do play an important role in traffic reporting and interpretation, but the cameras that are likely to make a difference are not the ones mounted along highways. Front-facing mobile phone cameras are the new frontier waiting for a clever entrepreneur. More than one industry executive has talked to me about the potential power of a network of camera probes transmitting real-time traffic camera information from the road. The user interface is a potential issue as is the required bandwidth, but what is a market changing proposition without a few challenges? There is more than one way to make such a network come to pass, these executives suggest, including everything from a dedicated dashboard camera to a smartphone-mounted device to a forward-facing camera on a PND or even the use of existing on-board cameras. Solutions already exist. Navigon has shown augmented reality navigation solutions using forward-facing cameras and Imaginyze has a lane-departure warning app based on a similar device. There is even a company, Apollo Video Technology, with an iPhone app to allow transit officials to view live video feeds from buses, trains, police cars and transit vehicles. Even the execs working on the Next Generation 911 solution for the U.S. are looking for ways to integrate video and text reporting of incident information from smartphones or other devices. It shouldn't be too long before a crowd-sourced traffic solution is introduced for smartphones that allows for the automatic uploading of photos and video stills from a dashboard perspective of traffic conditions under predetermined circumstances. To make such a crowd-sourced solution effective requires a sufficiently large and connected network of users and an automated application. In fact, it is almost shocking that neither TomTom nor Nokia have taken the leap into crowd-sourced traffic video feeds. Or is it? While I was a big fan of integrating traffic video feeds into navigation solutions two years ago, with today's emphasis on mitigating distracted driving the idea has lost significant traction. In fact, U.S. Transportation Secretary Ray LaHood is on a personal jihad to ban even voice calls while driving. Video is important and can be powerful, but the time is not right and the concepts currently in the oven - including Visteon's TrafficLand app - need more time to reach maturity. What is available today, however, is crowd-sourced traffic data from Inrix via its iPhone app (and soon on Android). The app-based Inrix system is the most complete solution, designed around one-touch incident reporting along with the ability to validate the entries of nearby drivers as well as to share the resulting data with local departments of transportation. Aha Mobile has been combining its own crowd sourced inputs with Inrix flow and Clear Channel incident data since late 2009. In fact, Inrix's approach stands as a model for future crowd-sourced traffic solutions with its tools for ranking participants and identifying "trusted sources" and the integration with local traffic authorities. Since June, 47 of 50 state DOTs in the U.S. have adopted Inrix's agency model for sharing this user-generated data, which the DOTs are able to view on the large screens in their traffic operations centers and then check by dispatching their own responders. Inrix says it is processing these crowd-sourced traffic feeds in real time thereby revolutionizing traffic reporting. In this way, Inrix is distancing itself from the existing competition through the integration of an entirely new source of data and a closed loop approach. The challenge for Inrix, though, is the limited size of its probe network, based on users of the downloadable iPhone app.  To have an impact Inrix, mainly seen as a white box supplier to the industry, will need a little help from its industry friends. Crowd-sourced traffic information has become the new standard and Inrix is setting the bar. Waze may claim to have the largest user population worldwide, but the company has chosen not to integrate other corroborating traffic information sources. Fusion of multiple types of data sources is a critical foundation for using crowd-sourced data, along with building  validation processes. Inrix has the largest North American population of users and has recently rolled out its apps in Europe. It is collaborating with ClearChannel in North America and other incident providers internationally for journalistic data. Crowd-sourcing of traffic data is nothing new. Crowd-sourcing by mobile phone users has been around for decades. It is only recently, though, that smartphone apps have enabled the automation of the process and, now, with Inrix's system, the integration of crowd-sourced data into local DOT traffic feeds - although Inrix traffic app users get the data right away, including inputs from nearby drivers. What is curious is that Inrix, while not the first to market with crowd-sourced traffic, is the first to take it to a level where it is integrated with official traffic feeds. While the crowd inputs are validated or rejected by other users on the network, the local DOT is also involved in the validation process. The open line of communication with local DOTs also means that real time street closings and openings can be transmitted along with incident validation. Inrix is not alone. TeleNav has a crowd-sourcing function for its app and TrafficTalk has been testing a crowd-sourced offering. Harman's Aha Mobile and competing mobile platforms will no doubt seek to bring their own offerings to market as well. Looking at the Inrix model, one has to wonder why TomTom, OnStar, ATX, Google, Nokia, RIM, TCS or TeleNav haven't moved in the same direction. OnStar has its good Samaritan function for reporting accidents, but there is no provision for instantly integrating an OnStar user-reported accident on the in-vehicle navigation/traffic display  - let alone sharing it with public authorities in real-time. The same is true for ATX. Conclusion: The automotive environment is ripe for crowd-sourced applications, which already include the reporting of speed traps (Trapster). The world of thumbs up/thumbs down, check-ins and trusted providers of reviews/data is rapidly proliferating on mobile devices and migrating into embedded automotive solutions. It is fitting that traffic information lead this migration since this form of data is of the highest relevance to drivers and rapidly changing. The power of crowd-sourcing of traffic data has the dual effect of creating a new source of incident data along with its own validation process. One of the greatest challenges to creating reliable traffic information systems is validating journalistic data inputs. The crowd is able to view live traffic data, create new data and validate that data. The next step is to open the taps to other data types from parking and gas pricing to weather and event information. Eventually, crowd-sourced video will work its way into the mix as well - and probably sooner than anyone expects. Additional insights: http://bit.ly/dniNxa - Navigation Heuristic Evaluation: Telmap5 – Schreiner – Automotive Consumer Insights http://bit.ly/95NCoW - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority – Blight – Automotive Multimedia and Communications Service http://bit.ly/dtRE5C - Automotive Telematics Services: Shifts in Pricing and Monetization Expected – Canali – Automotive Multimedia and Communications Service http://bit.ly/bwdwcW - Connected Vehicle and Vehicle Device Connectivity System Database by Feature, Region, and Price 2010 – Canali – Automotive Multimedia and Communications Service http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles – Canali – Aumotive Multimedia and Communications Service http://bit.ly/deumcd -# Traffic Data Quality Will Determine #Telematics Winners - Lanctot - blog - Strategy Analytics

Europe is one of the most competitive markets for traffic data and TomTom claims pan-European market leadership by virtue of its HD Traffic solution. The power of HD Traffic lies in its use of cell signaling data to identify traffic jams and notify drivers who may need to be rerouted or who may want to change their driving plans completely. This analyst is a big fan of HD Traffic, having used it in recent European travels, but the company makes a claim in its latest press announcements that raise questions about HD Traffic even as they call attention to the power of the solution. Taken along with TomTom’s Traffic Manifesto (http://bit.ly/9IHHDj) one wonders if the company is more interested in bravado than actually advancing the art and science of properly interpreting traffic data. It is no small feat for TomTom to be such a standout player in the European market. There are multiple market players in Europe with GPS probe-based solutions, cell signaling solutions and all manner of offerings based on public, private, historic and real-time data “algorithmed” into elegant predictive models. And new predictive models and routing schemes seem to emerge on a regular basis. But TomTom was first on the continent with a multi-country cell signaling solution – HD Traffic – and the company has had it in devices and in use for more than two years with admirable results. Competitors, most notably iTIS Holdings in the cell signaling space, and Nokia Navteq and Inrix with probe-based solutions, are threatening, but the TomTom HD Traffic solution, thus far, remains dominant. All three competitors also integrate other real-time and historical traffic data. At the Paris Auto Show two weeks ago, TomTom announced the release of its next generation traffic data system across Europe. Called HD Traffic 4.0, TomTom says it is the first pan-European solution to use historic, real-time and predictive traffic data to deliver the most accurate traffic navigation available. While there are other traffic providers in Europe that use cell signaling data and similar data sources and types as TomTom, the company remains the only one with its scope of market coverage and with a commercially available retail product. The company says HD Traffic 4.0 covers more of the road network and reports traffic jams with more accuracy, giving drivers the most precise traffic information in Europe. The company says existing HD Traffic customers “will experience the benefits immediately, without the need for any software upgrade.” But at this point in the TomTom press release, the company introduces a bit of murk that both shines a light on its technology and raises questions. TomTom says its real-time and predictive traffic technology “now detects traffic jams that other services are unable to:”“HD Traffic 4.0 reports traffic jams with higher accuracy, reporting up to 200% more traffic jams during rush hours than previously, in particular on urban roads.” –TomTom press release. This claim raises a host of questions about the relative merits of cell signaling data and the very definition of a traffic jam or the quality and accuracy of congestion detection. The critical determining evaluative criterion both academically (see BMW’s Qkz traffic quality standard methodology) and intuitively is: Does this traffic solution detect what I am or what I, as a driver, may experience/perceive/consider to be “congestion?” Cell signaling data, based on triangulation of handset signal strength, is some of the most powerful available traffic data for reasons related to the ubiquity of handsets and the universality of cell signaling. Anyone with a mobile handset that is within range of a cell tower is automatically transmitting location data, which can be interpolated from the cell signals. While advocates of probe data are quick to point out the low level of accuracy of this signal interpolation – perhaps as poor as 100-200 meters – suppliers continue to refine their models and algorithms. The proof is in the pudding. AirSage in the U.S., TrafficCast in China, IntelliOne in Toronto, Cellint in Israel and TomTom and iTIS Holdings in Europe have all produced usable and commercially available traffic flow solutions based on cell signaling. (In fact, the data is not just used in traffic solutions for drivers it is also used in urban planning and in the selection of locations for billboards, stores and cell towers, among numerous other applications.) In contrast, handset GPS probe data not only requires the presence of a GPS module in the handset, but also requires the user to turn the GPS receiver on. The rapid battery consumption of GPS modules guarantees that GPS based solutions, though more accurate, will necessarily be based on a smaller data set.In this context the TomTom claim breaks down two ways. Either TomTom is claiming that it is capable of detecting 3X more (+200%) traffic/congestion incidents than competing solutions on THE SAME roads, or it is claiming to detect 3X more traffic/congestion incidents because its roadway coverage is broader. Further, it appears that the claim is associated with HD Traffic 4.0, which is most likely an enhancement of the existing data interpretation algorithm. Since TomTom appears to be mainly concerned with detecting jams on major roadways, the claim is clearly associated with detecting 3X as many jams on those roads as the competition. The fundamental problem with this claim is that it exposes the single weakest aspect of cell signaling data: FALSE POSITIVES. Because of the combination of the huge volume and low accuracy of cell signaling data, the technology has always been prone to generating false positives. False positives are indications of traffic jams that, in fact, do not exist and are actually misinterpretations of the cell signaling – ie. parked cars mistaken for a jam. In this analysts’ experience, TomTom devices identify multiple jams on the roadway ahead (something not all technologies or devices are able to do) which, more often than not, disappear before the driver arrives at the identified location. In other words, it is not clear whether the multiple congestion points being reported ever really existed. Other detection technologies are equally vulnerable to false positives, but it is the volume of data and the number of false positives that uniquely distinguishes cell signaling-based solutions. To look at the TomTom claim with an even more cynical eye, it is possible to suggest that TomTom simply changed its definition of an accident in order to claim a threefold increase in reported jams. BMW’s Qkz traffic quality standard uses 50Km/h as a measure of congestion detection accuracy. If the standard were raised to 60Km/h, the number of detected points of congestion would increase in a corresponding fashion. TomTom wants to get drivers to their destinations faster by helping them avoid jams. The company claims a 15% improvement in travel time based on its technology. It is time for TomTom to close the gap in logic and explain more precisely and honestly how it is achieving travel time improvements, if it is in fact doing so. By now, most drivers know from painful experience that traffic, like a balloon, is a zero sum game – squeeze it on one side and it simply bulges out the other. It would be good to know whether TomTom’s claims are something more than hot air. Additional insights:http://tinyurl.com/2bz9zq6 - Google, Nokia and New Entrant Positioning in Automotive Infotainment - Lanctot – Automotive Multimedia and Communications Service http://bit.ly/dniNxa - Navigation Heuristic Evaluation: Telmap5 – Schreiner – Automotive Consumer Insights http://bit.ly/95NCoW - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority – Blight – Automotive Multimedia and Communications Service http://bit.ly/dtRE5C - Automotive Telematics Services: Shifts in Pricing and Monetization Expected – Canali – Automotive Multimedia and Communications Service http://bit.ly/bwdwcW - Connected Vehicle and Vehicle Device Connectivity System Database by Feature, Region, and Price 2010 – Canali – Automotive Multimedia and Communications Service http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles – Canali – Aumotive Multimedia and Communications Service http://bit.ly/deumcd -# Traffic Data Quality Will Determine #Telematics Winners - Lanctot - blog - Strategy Analytics

TomTom’s marketing machine was in overdrive last week with announcements of a new OEM relationship (Mazda) and advances with existing partners (Toyota, Renault), enhancements to its (European) market-leading traffic solution (HD Traffic) and a traffic manifesto. But undoing all that positive spin was the note that the company still wants to charge about $50/year for its Live Services. It looks like TomTom didn’t get the latest email about automotive value propositions. As connectivity comes to more vehicles, drivers (and passengers) will get more of their content and services from the “cloud.” What this means is that car makers will increasingly have in place systems for sending, receiving, processing and managing all types of vehicle data – the “back end.” (This is not unlike what is happening at your average NASCAR or Formula One event every weekend – without the parking space availability and Internet radio.) The value of this data is manifest to the car makers for better understanding the performance of their vehicles on the road as well as better understanding how consumers use and abuse their cars. The implications for cost avoidance, warranty and recall management are in the millions of dollars of savings. There is no immediate or obvious benefit to the driver. For this reason, this kind of vehicle connectivity ought to be free. (On the other hand, OnStar and others have demonstrated that people will pay for safety and security.) As more drivers shift to smartphones (with mandatory data plans) with access to a wide range of content and services, they will be less likely to pay for any service from the car (or PND) maker that is available for free (or for which they are already paying) via their mobile phone. So how is the industry (and TomTom) going to monetize all this connectivity? Enter the back end value proposition. Auto makers and Tier Ones have gotten the message and recognize that driver and passenger eyeballs and “click-throughs” have value. A driver asking for directions to a restaurant or movie has economic value. A system that knows the location of the driver has value. Beyond this, a system that is able to provide a broader “cloud” perspective of all location-related activity – including everything from prosaic traffic information to “heat” maps of gatherings of people, weather, etc. – has other value-add implications for drivers, passengers and roadway systems and public transportation overall. But in the short-term, vehicle related information for diagnostics, safety and entertainment take priority. Continental, Harman, Visteon, Delphi and Pioneer clearly understand this. All of these companies have introduced systems or platforms that seek to leverage vehicle location information for commercial opportunities. Even Best Buy’s connected PND delivered sponsored links in its Google Search. Unfortunately, Tier Ones face an uphill struggle in trying to get a piece of this action. The telematics eco-system consists mainly of a telematics service provider (ie. ATX), a carrier (ie. Sprint or Verizon) and a system integrator (ie. TCS). Each of these operators is interested in the other’s business – with the possible exception of the call center. (No one wants the call center hot potato – too much cost.) While the call center tends to be shunned, the data back end tends to be either misunderstood or underestimated. But the back end system is rapidly becoming the backbone of the system altering the competitive landscape. The power and influence of back end systems is visible to the consumer in the growing variety of free content and services via smartphones. Google probably has the largest back end system currently influencing developments in the automotive market. With its free navigation, traffic and search and an open source operating system, Google has rattled the industry mightily over the past two years. Carriers, meanwhile, are trying to fight there way in – not content to be simply white label suppliers of bandwidth. Among the carriers sniffing around the telematics back end opportunity are Verizon, Sprint, T-Mobile, Telenor, Orange, AT&T Mobility, Vodafone and Ericsson. All of these companies recognize that their servers are as valuable as their networks. Some of these companies fancy themselves Tier One players. At least three handset makers have the potential to rise to the Google challenge: Nokia, Apple and RIM. Like Google, Nokia is offering free navigation while also seeding the market with open source development tools (Qt), operating system softare (MeeGo) and smartphone connectivity technology (Terminal Mode). But Nokia remains ambivalent about the automotive opportunity. MeeGo is not ready for market and Ovi has not been designed for automotive opportunities. RIM brings a unique value proposition combining its smartphone system experience with its newly acquired QNX automotive expertise. RIM represents the most immediate threat to Google’s potential dominance in the automotive market because of its potential to deploy navigation and traffic applications (based on handset probe data) and its ability to monitor, manage and mine its network data traffic. Apple’s strength lies in its secure systems for managing commerce for downloading applications and enabling the purchase of content. For these reasons, Apple and RIM both have the scope and scale to add value to automotive opportunities. The massive giveaway of content and services by both Google and Nokia is a setup for capturing click-through traffic and back end processing opportunities for creating metrics and analytic output. Google already has the analytic tools in place, unlike Nokia. The current landscape for back end services is highly fragmented and includes companies such as TeleNav, Airbiquity, Hitachi, TeleCommunications Systems, Hughes Telematics, WirelessCar, Oracle and IBM, along with the previously mentioned wireless carriers, RIM and Apple. (Strangely, Microsoft seems to have disqualified itself – having disbanded its automotive business unit. The original vision defined by Microsoft at multiple industry events included integrating more and more Microsoft solutions such as Bing, Tellme, and Silverlight into automotive platforms, but the complete vision – including back end services – never materialized. The one exception to this no-show for Microsoft are the company's ongoing efforts to capitalize on the Bing search engine.) The value proposition of back end service providers revolves around secure management and processing of vehicle and driver data for applications ranging from vehicle performance and safety to content and infotainment and, ultimately, commerce opportunities. Neither OEMs nor Tier Ones are equipped to manage this opportunity and traditional telematics providers lack the scale. The lack of scale is one reason Airbiquity has partnered with Hitachi to service Nissan’s connectivity needs around the world. It is likely that companies such as Hughes and TeleNav will seek partnerships with larger integrators such as IBM or Oracle for the same reason. Nokia, like RIM, already has the scope and scale and like Apple already has the commerce platform (Ovi) but, unlike Apple, has done little beyond the introduction of terminal mode to optimize its offerings for automotive. TomTom is another player in need of a partner to provide the scope and scale necessary to compete in the connected space. The larger organizations that are able to monetize the connectivity proposition will force out smaller players dependent on subscription revenue. If TomTom can enhance its navigation and infotainment platform to include safety and security telematics, it will greatly improve its value proposition and the likelihood of building a devoted subscriber base. Conclusion Google and RIM are best positioned to leverage the back end data processing opportunity presented by the automotive industry. Google faces trepidation among potential OEM customers who are suspicious of the company’s motives and objectives. Google’s failure to validate its Android OS for automotive applications is another stumbling block. Nokia has discrete elements of a solution in place but so far lacks the commitment and execution to challenge either Google or RIM. Apple is a wild card player in a market that remains fragmented with the door open to new entrants. Microsoft's Bing search engine is another contender gaining traction, but, in the end, Microsoft is more of an arms supplier to the contesting parties. Winners in the battle for the back end will be those companies able to bring security and state-of-the-art analytics and commerce management to the automotive industry. Google knows analytics. RIM knows security and network management. It remains to be seen whether Nokia or some dark horse will step forward to challenge these two dominant players, but the race is on. Additional Insight: http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/aGJHDj - Smartphone Market Evolution and the Automotive Opportunity Implications -Fitzgerald - Automotive Multimedia & Communications

Retention is the key to the imminent rise of usage-based insurance. More accurate rating and customer acquisition may be the immediate motivations for insurance companies, but only customer retention has the power to transform the industry – and reduce carbon emissions in the process. These conclusions were clear from the Telematics Update Insurance Telematics event two weeks ago in Chicago. Returning home from the event, though, I was soon inundated with the daily tidal wave of car insurance advertisements on U.S. television. The multiple offers of the deepest discounts, lowest deductibles and superior service seemed like far more relevant messages to me as a consumer than the proposition of allowing the insurance company to monitor my driving behavior. Allowing an insurance company to monitor my behavior, to me, sounds like a particular circle of Hell inconceivable to even the vivid imagination of Dante. What I was forgetting in this kneejerk reaction is the equal and opposite force within me (or most consumers I presume) that is powerfully drawn to any discount – no matter how small – particularly if it is associated with cheaper car insurance – a product one pays handsomely for and hopes never to use. (Because if you use it you may lose it or end up paying more for it in the future.) The offers on television from Progressive, Nationwide, AllState, State Farm, Farmers and others addressed all of my concerns as a consumer. There were discounted rates earned by parents extended to teenage children. There were deductibles that decline over time when there are no claims. There were offers to top competing discounts. UBI insurance offers the prospect of cutting through the advertising clutter with a message that has the power to draw in new drivers while making them long-term committed subscribers in the process. On the surface, usage-based insurance looks like an expensive proposition (for the insurer) built around the concept of providing discounts to an insurance company’s best customers, according to multiple presenters at the Insurance Telematics event. So let me get this straight:  As an insurer I am going to spend millions of dollars to create a data acquisition and management system and deploy wireless monitoring devices all so I can charge my customers less money? It truly sounds crazy, until one understands the challenges of providing insurance. (No tears, please.) The insurance industry has few reliable tools to offer consumers proper insurance rates. What to the consumer appears to be a generally expensive product is priced based on an opaque process based on age, gender and location and a limited amount of driving history such as infractions, accidents and mileage. The industry was recently revolutionized by the deployment of credit scoring as a rating tool. Not surprisingly, credit bureaus featured prominently among attendees at the Insurance Telematics event. Credit scores, the early insurance company pioneers such as Progressive discovered, were an excellent segmentation tool and proxy for assessing risk. Possessing a more accurate tool for determining risk meant that underwriters using this tool could confidently justify deeper discounts than competitors and they won truckloads of business as a result. Of course, competitors soon learned about the new risk proxy and all companies began using credit scores for segmentation and risk analysis. Usage-based insurance is the new proxy and insurance companies are wary of missing a competitive advantage. From presentations at the event it is clear that the early movers in UBI insurance have learned that the process must be as simple as possible. As a result, Progressive has shifted from an OBDII plug-in device that had to be removed and connected to a consumer’s computer, to a wireless module the customer can plug in and forget. (Progressive has already moved on to the next incarnation as well, read on.) Similarly, Octo Telematics, the European pioneer of UBI insurance with more than 1M subscribers via multiple insurance partners, has introduced a device that clamps onto a car battery. This is an alternative to a device that was professionally (and expensively) installed on the vehicle and provided additional services such as stolen vehicle recovery. Multiple exhibitors at Insurance Telematics touted Bluetooth-based or cellular-based OBDII connections for extracting vehicle data – including Directed Electronics, Zoomsafer, Telenor, Walsh Wireless, Numerex, SmartDrive, Scope Technologies, Matrix Technologies, Xact Technologies and Octo Telematics. (Attendees actively discussed word of legal action between Hughes Telematics and insurance and device providers and others over the use of wireless technology for acquiring vehicle data via the OBDII port. Some companies are reported to have settled with Hughes or, as in the case of Progressive, countersued. Suffice it to say that the intellectual property underpinnings of insurance telematics are unresolved.) The powerful interest of consumers in obtaining discounted insurance taken together with the newfound ability of insurance companies to offer discounts based on more accurate risk segmentation is the motivating force behind a revolution poised to sweep the industry. But why is there little or no advertising of UBI insurance in the U.S. when Progressive has been in the game for 12 years? (European advertising of UBI insurance is widespread.) The answer is simple: The insurance industry is governed by 50 different state authorities, some of whom, such as Pennsylvania, have challenged the rating models and others that simply haven’t made their final ruling. (Pennsylvania withheld approval based on their requirement that Progressive disclose the details of there rating model.) Progressive’s SnapShot product is currently available in 23 states. Another learning from the early UBI movers has been that the device need not be indefinitely installed in the vehicle. Insurers active in UBI have learned that a limited time (ie. one month? six months?) “snapshot” of a driver’s driving behavior is sufficient to assess risk and applicable discount. The SnapShot approach also means the device can be removed and plugged into another customer's vehicle for yet another driver assessment.  Of course, this same snapshot is also key to determining which drivers qualify – and insurers have found that not all drivers are suited to UBI programs. As speakers at the Insurance Telematics event repeatedly said: Everyone thinks they are an above-average driver, but only 50% of those can be correct. The key to success in UBI insurance will be to move early. Insurers feel an overpowering need to deploy systems absolutely as quickly as they can because the likelihood is that the first module a customer installs will be his or her last. Once the insurer learns that customer’s driving behavior and can accurately and affordably underwrite their risk, the customer is unlikely to switch insurers. The competing insurer will always be at a disadvantage, not knowing the customer’s driving behavior. For this reason, the industry is struggling to move very quickly in the U.S. in spite of the state regulators and IP issues. UBI has the ability to change the balance of power in the industry and no company wants to be left disarmed. Conclusion: This battle has just begun. Insurers are likely to package offerings built around comprehensive portfolios of driver services such as roadside assistance, navigation and maybe even stolen vehicle recovery to say nothing of on-scene claims reporting – all built around the modules they are bringing to cars. UBI insurance will not only transform the insurance underwriting industry, it also has the potential to alter the relationships between insurers and OEMs. Insurers that deploy telematics systems are in a position to threaten OEM relationships with their own dealers and consumers. Wireless carriers too have skin in the game as insurance applications are already deployed to mobile phone platforms. Insurance companies have powerful leverage over the customer and cannot be ignored by any of these parties and the mobile phone is an alternative path for a UBI deployment. UBI insurance will rapidly achieve ubiquity nationwide. The prospect of obtaining discounts based on driving behavior will lead to some actual improvements in driving behavior but, mainly, it will contribute to a reduction in driving activity overall, which may be the best outcome of UBI deployment. In the end, the insurance industry will achieve the road charging objective of reducing carbon emissions (a Federal goal) which will forever be politically beyond the reach of  Federal authorities. Additional Insights:http://bit.ly/aWhNuC - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/9QCIVw - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Datatables - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/9PUqjp - UBI Market Poised for Growth - John Canali - Automotive Multimedia & Communications

In these times of economic travail it’s hard to believe that car makers are leaving money on the table, but they are and they have for many years. With car makers and carriers wailing about how to get consumers to pay for content and services a very obvious multi-million dollar (Euro?, Yen?) opportunity for add-on business for dealers and for the OEMs themselves has been left undisturbed – and Roadside Telematics has the answer. The amazing thing is that Roadside Telematics has been around beating a drum for its RoadMedic solution for more than 10 years – adding endorsements and winning awards – but failing to achieve much OEM recognition beyond Ford and Kia. The interesting thing is that this telematics solution requires no box, no call center, no fancy wireless connection, but it does require a smidgen of customer consent and a communications link to the National Law Enforcement Telecommunications System (NLETS) – the same communications network leveraged by LoJack and OnStar for their stolen vehicle solutions. The beautiful thing about RoadMedic is that it solves an age old problem for dealer and car maker alike: how to capture the crash parts and vehicle replacement business opportunity from new and existing customers that have gotten into accidents. A damaged or totaled car can mean a lot of things to a dealer, the vehicle owner or the car maker. A damaged or totaled car can mean a chance to sell a new car or repair an existing car (still under a lease or other financing) with genuine, authorized parts. It can also mean the opportunity to provide roadside assistance and/or a loaner vehicle both of which services are already provided for in existing warranties or OEM sponsored roadside assistance plans, though the customer may not realize it. In others words, it is a customer service opportunity. The primary purpose of the RoadMedic solution, as made clear by its name, is to deliver emergency contact information to police officers responding to accident scenes. The problem is that due to a wide range of circumstances the amount of time that elapses, on average in the U.S., before family members can be notified is six hours. Roadside Telematics has secured the support and assistance of the American Association of State Highway and Traffic Officials along with a variety of other health and safety affiliated organizations including: HIMSS, IEEE, AHIMA, IHE, CCHIT, HITSP and GHSA to encourage the OEMs to collaborate and cooperate on the development and deployment of a nationwide emergency contact locator system, like RoadMedic. RoadMedic allows dealers to reach out to customers, with their consent and at their request, in the event of accidents to provide necessary services thereby strengthening the brand message. It’s a patented business proposition that Roadside Telematics calls “reverse retailing.”  The Roadside business model is dependent upon customers providing their emergency contact information at the dealership point of sale. The business model calls for OEMs to pay Roadside Telematics on a per-vehicle basis which is included in the wholesale delivered price to the dealership, similar to the existing business model for OEM sponsored roadside assistance.It is hard to believe, but in an age of proliferating vehicle connectivity, cars can automatically notify public authorities of an emergency situation, but there remains no provision for expediting a connection to family members or other designated emergency contacts. OnStar rolled out a system nearly 10 years ago with a partner called Global Med-Net. But the Med-Net solution – customer endorsements of which are still visible on the company’s Website – was fax based and overreached somewhat by trying to integrate medical information. The Roadside Telematics solution is officially characterized as handling health information in the form of emergency contacts. The Med-Net solution, in contrast, sought to include important medical history. This complicated the point-of-sale paperwork and when combined with the fax-based portion of the notification process proved fatal to the program. It was terminated in 2002. The Roadside solution will allow police officers using NLETS to tap into both the RoadMedic emergency contact database and DMV databases to locate appropriate emergency contacts – providing a critical customer service. In fact, it is an even more reliable service than existing embedded telematics systems or even mobile phones because the notification is based on the police look-up of the VIN# and not on an unpredictable carrier connection.But it is the accident aftercare opportunity that is most intriguing for dealers. A customer will be able to call the dealer for accident aftercare services such as towing or to obtain a replacement car. Today, most customers are provided a wallet-sized Roadside Assistance card which is often misplaced. Worse, the average customer does not even think of adding the roadside assistance card to their wallet or purse. At point of sale the customer can opt in for this accident aftercare and, in the event of an accident, the dealer will get an accident vehicle sales lead – which is where the patented reverse retailing model comes into play. The dealer then has the option to contact the customer to offer to repair the vehicle, with authorized parts, or replace it and/or to provide a loaner vehicle. Roadside Telematics estimates net average OEM results from RoadMedic implementation as rising from $5.5M to $23.4M over the first three years with corresponding revenue gains for dealers. Best of all, the philosophical objectives of the service fit well with the safety and security objectives of existing telematics sytems. Of course, there are also insurance implications to the Roadside Telematics proposition. There is no doubt that insurance companies will always want the earliest possible notification of an accident. The good news for insurance companies is that they are usually the first ones to get the call from a conscious driver, but in the event of a more severe accident they may not be contacted right away. Some car companies, most notably Kia Motors, have embraced the Roadside model, though none have implemented it. Ford conducted a test of concept in Texas in 2004 and Volvo has committed to a test in Los Angeles. Roadside’s goal is to see the system put in place globally and allows that a typical OEM might even seek to reach out to existing vehicle owners to implement the system retroactively, while dealers may want to apply the system to certified pre-owned cars. Conclusion: As someone who has bought four cars in the past 7-8 years and who continues to receive service notifications for cars I no longer own or that no longer exist (due to accident) this analyst sees a powerful business proposition for dealers, OEMs and insurance companies. As a dealer, I want to know when my customer needs a loaner or replacement car or maybe even a repair. As a vehicle insurer, I want to know when that vehicle, that may not yet be paid for, is damaged or destroyed and/or when and if the driver is injured. In fact, if the vehicle is going to be repaired, I will want it repaired with genuine parts. As an OEM, I don't want to lose a customer who may have lost their vehicle entirely. Clearly, car makers, insurers and  dealers can all agree on the RoadMedic value proposition - the public authorities already have.

When IBM had the personal computer industry in a headlock, the company was able to freeze customers’ plans to purchase competing PCs by releasing fear, uncertainty and doubt (FUD) in the marketplace. It achieved this goal by announcing its own plans for new products 6-12 months in advance. Sirius XM used its earnings call earlier this month for the same purpose, announcing plans for Satellite Radio 2.0 for Q4 2011. The difference, of course, is that Sirius XM does not control the market for broadcast radio content. In fact, the company is facing competitive pressures from both terrestrial and Internet-based sources. Further diminishing the Satellite Radio 2.0 gambit, is the declining portion of Sirius XM’s revenue and unit volume coming from retail, aftermarket devices. (According to estimates from the Consumer Electronics Association, satellite radio sales to dealers fell to $64M in 2009, with declines forecasted through 2013.) Sirius XM executives stated in the Q2 earnings call plans for the launch of the XM 5 satellite in October and the launch of Sirius 6 in Q4 2011. Also due to arrive in Q4 2011 is the newly touted Satellite Radio 2.0. Sirius XM execs said that SR 2.0 will offer consumers greater capacity and more functionality – both enhancements are intended to stimulate average revenue per user (ARPU). These same execs noted that no additional satellite launches will occur for several years, setting the stage for improved cashflow and profitability. In addition to the satellite and service launches late next year, the Federal Communications Commission (FCC) limitations on Sirius XM subscriptions will end in August 2011. All of these indicators are positive for Sirius XM except for the fact that competition has intensified. With the FCC limitations removed, Sirius XM will have a much broader scope of subscription options given the 150+ range of stations to choose from. SR 2.0 promises even more ARPU upside with added channel content and, as Sirius XM execs clearly indicated in their earnings call, a wider use of data for telematics and other applications. It is interesting to hear Sirius XM getting excited about telematics as a potential ARPU contributor, and it is an indication that the company is moving in the right direction and recognizes the shortcomings of the existing service. It is also, no doubt, a response to competitive pressures from HD Radio and Internet radio. The question is whether or not this awakening at Sirius XM is coming too late to matter. HD Radio technology is proliferating as more OEMs adopt the technology and more radio stations join the burgeoning ranks of participating broadcasters. HD Radio is appealing since it operates over the same FM frequencies, though requiring some additional hardware, and it is free. At the same time, more and more OEMs are lining up music service solutions such as Pandora along with Internet radio - via smartphone connectivity in the short-term and embedded solutions in the long run. The success of Pandora is a testament to that company’s ability to deliver a solution that is able to integrate seamlessly with automotive systems. Competitor Slacker’s content-caching music service is not less compelling, but OEMs have not found integration to be nearly as simple. Still, the tide that is lifting Pandora's boat will likely benefit other music services and Internet radio providers, such as ClearChannel's IHeartRadio. The timing and manner of Sirius XM's announcement of Satellite Radio 2.0 suggests that Sirius XM is attempting to prevent OEM defections to HD Radio, music service solutions or Internet radio. OEMs are in the process of making decisions today that will impact vehicle platforms four and five years hence. Sirius XM executives refused to explain exactly what SR 2.0 will be. But given the short launch window, it will no doubt arrive in the retail aftermarket first. The company is currently briefing OEMs regarding its confidential plans. Sirius XM has already lost momentum in the automotive market. Car makers (and aftermarket system makers) have shifted toward offering satellite radio as an option rather than as a standard feature. And both Sirius XM and its OEM customers are using subscription conversion data to determine which cars should and should not be offered with the service. This means that even though Sirius XM has been able to show subscriber gains in its past two quarters, rapid growth is a thing of the past and pales by comparison to the subscriber numbers of a Pandora or Slacker. On the earnings call Sirius XM execs said that availability of satellite radio technology in cars was at approximately 60% of car models with a paid subscription conversion rate of 47%. The company currently claims more than 19.5M subscribers and anticipates somewhat more than 20M by the end of the year. OEMs say that if it weren’t for their multi-year agreements with Sirius XM they might have walked away from the relationship a long time ago. (Several OEMs are also shareholders in Sirius XM.) This sour sentiment does not bode well for Sirius XM moving away from the subsidy model it maintains in the automotive market. This subsidy model also means that the cost of acquiring new subscribers – given the decline of retail satellite radio sales – will continue to rise as the balance between retail and OEM sales continues to shift toward subsidized OEM subs. Further clouding the otherwise rosy long-term outlook for Sirius XM is the mandated switchover to XM. OEMs currently offering Sirius satellite radio service have been told they will have to switch to XM by 2016. The honeymoon for Sirius XM is clearly over. The question now is whether SR 2.0 can save the store. Satellite Radio 2.0 There are three areas where SR 2.0 could help Sirius XM hold onto its existing subscribers while attracting new subscribers. Here are Strategy Analytics’ thoughts on what SR 2.0 will look like: Audio – Sirius XM faces its biggest audio challenge from Internet radio and music services generally and Pandora in particular. All of these services are paid and Internet radio has suffered a blow from the onset of tiered data plans limiting the use of such services. Nevertheless, OEMs have embraced Internet radio because of the powerful consumer demand and awareness – several times the user base of satellite radio and widely and easily accessed on multiple platforms without any additional hardware. The only solution Sirius XM can offer is more or better-targeted audio channels. Ironically, the more channels Sirius XM adds the more difficult it is to use. Expect Sirius XM to update its content search and save capabilities to better replicate an Internet radio experience. Sirius XM can also be expected to enhance its iPhone and iPod integration with song-tagging not unlike HD Radio’s capabilities. Expect Sirius XM to add additional capabilities, along the lines of what iBiquity Digital has been showing in HD Radio demos for the past 2-3 years. Enhancements are likely to include more artist, track, album information; album art; song duration; maybe even reviews or other metadata from suppliers such as Gracenote or Rovi. Traffic – For some reason Sirius’ traffic data services are not comparable to offerings from direct competitors such as ClearChannel’s RDS-TMC. Side-by-side comparisons conducted by this analyst of both XM NavTraffic and the Sirius traffic service have found them to be lacking in comparison to both PND and embedded solutions. The only good news for Sirius is that RDS-TMC is only offered standard by half a dozen car makers. Still, with the proliferation of HD Radio technology, Sirius will soon be up against TPEG traffic data content, putting it further behind the eight ball. Sirius must bring its traffic data services up to a competitive grade. Strangely, the company does not even use the same flow and incident sourcing between its data (Traffic.com) and broadcast traffic services (Westwood One). Expect Sirius XM to do something about the shortcomings in its traffic reporting. OEMs are definitely making comparisons between HD Radio and satellite radio traffic services and making critical long-term decisions. Expect major traffic data improvements in SR 2.0 including the implementation of a standard traffic database system – such as Gewi’s TIC 3 – and/or TPEG traffic information services. Only time will tell if the changes will be enough or will occur soon enough to preserve strong OEM relationships. Even more ominous for Sirius XM is the fact that more and more OEMs are building the cost of traffic into the cost of their vehicles. The $3.99/month traffic subscription for Sirius XM traffic data will not survive this process of commoditization - especially if the data quality is not competitive. Data – Sirius XM’s Travel Link service, offered by Ford, is an impressive voice-driven offering of content such as gas pricing, ski conditions, news, weather, and sports. Expect Sirius XM to bring this offering up to speed with a greater variety of content delivered with improved graphics. The competition here comes mainly in the form of smartphone solutions, so the challenge to compete is steep. Can Sirius XM breathe life into its retail aftermarket position with SR 2.0? Can the company preserve its standing with OEMs, which are more concerned with reducing costs and complexity? For now, Sirius XM is on a path to continue to build its subscriber base, enhance its service and reduce its operating expenses. But the future of the company hinges on whether car makers will continue to tune in beyond 2016. Further insight: http://tinyurl.com/2bz9zq6 - Google, Nokia and New Entrant Positioning in Automotive Infotainment - Lanctot – Automotive Multimedia and Communications Service http://bit.ly/dniNxa - Navigation Heuristic Evaluation: Telmap5 – Schreiner – Automotive Consumer Insights http://bit.ly/95NCoW - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority – Blight – Automotive Multimedia and Communications Service http://bit.ly/dtRE5C - Automotive Telematics Services: Shifts in Pricing and Monetization Expected – Canali – Automotive Multimedia and Communications Service http://bit.ly/bwdwcW - Connected Vehicle and Vehicle Device Connectivity System Database by Feature, Region, and Price 2010 – Canali – Automotive Multimedia and Communications Service http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles – Canali – Aumotive Multimedia and Communications Service