GM’s Chevy Volt is the best thing to happen to electric vehicles since the Prius hybrid. In fact, it would be even bigger than the Prius if more than 10,000 were being made next year. The car represents revolutionary technology. It makes electric vehicles palatable to the mass consumer – at least conceptually if not based on the $41,000 price tag. The electric vehicle business was in desperate need of a car like the Volt that could take the worry out of driving electric. By adding the internal combustion engine (ICE) to drive the electric motors when the vehicle’s on-board battery is exhausted the Volt offers an acceptable range for any kind of driving requirement.

The car also features cutting edge componentry with a low-weight, low-energy stereo system from Bose, an OnStar telematics system (with five years of free service) with an iPhone app, and a multiple-screen vehicle diagnostic experience. The car looks and feels and drives like the future. But the simplicity of the Volt concept belies the complexity of the electric vehicle business and therein lies some long-term concern for the viability of any alternative fuel vehicles. A big contributor to the complexity of the EV picture has been the Regulatory Authorities.

My kingdom for a PZEV

The regulatory authorities are well-meaning bureaucrats who are trying to stimulate demand with financial incentives for specific types of cars while providing guidance to the auto maker community regarding which kinds of vehicles will be acceptable to meet fleet emission standards. These efforts have produced an alphabet soup of vehicle categories and a maze of definitions that have been further confounded by the automotive press. From the regulatory authorities we were originally given (see Strategy Analytics reports referenced below for detailed definitions and history):

·        TLEV – Transitional Low Emission Vehicle

·        LEV – Low Emission Vehicle

·        ULEV – Ultra-Low Emission Vehicle

·        SULEV – Super-Ultra Low Emission Vehicle

·        ZEV – Zero Emission Vehicle

These categories would be humorous in and of themselves but they have already been superseded by:

·        ILEV – Inherently Low-Emission Vehicle

·        PZEV – Partial Zero Emission Vehicle

·        AT-PZEV – Advanced Technology Partial Zero Emission Vehicle

·        NLEV – National Low Emission Vehicle

Again, it is tempting to chuckle, but these categories have very real and very specific definitions that can mean the difference between a $7,500 vehicle incentive and a combined $12,500 vehicle incentive. The Volt is a case in point. Because the car was introduced with an 8-year/100,000 warranty on the battery instead of a 10-year/150,000-mile warranty it did not qualify as an AT-PZEV according to the California Air Resources Board (CARB) requirements and missed out on the additional $5,000 incentive in California for which the Nissan Leaf does qualify. (This was in spite of the fact that GM reportedly tested and validated the car for the 10-year warranty and expects to boost the warranty for the current Volt or on a new version of the car by 2012.)

EVs not EZ

To make matters worse, the automotive press and industry trade associations have their own roster of EV categories – presumably reflecting their assessment of consumer perceptions. The Electric Drive Trade Association lists the following categories:

·        HEV - Hybrid Electric Vehicles

·        BEV - Battery Electric Vehicles

·        EREV - Extended Range Electric Vehicles

·        Plug-in Hybrid Vehicles

·        Fuel Cell Electric Vehicles

The Volt is sui generis! It is the only EREV, according to the EDTA. This is something that bothers industry types. This would be a minor point if it were the end of the conversation regarding the definition and categorization of the Volt, but it is not. According to some sources the Volt operates as a “plug-in series hybrid” or as a “power-split or series-parallel hybrid” depending on speed or driving mode. By the way, in California, the Volt is considered a ULEV and not a SULEV based on emissions testing.

When is a Volt not a Volt?

Few cars in the history of the automotive industry have been subjected to as much scrutiny as the Chevy Volt – suggesting some strange American instinct toward eating its own young. The Chevy Volt is unquestionably the nastiest, most clever move the automotive industry has pulled in decades. It just seems to frustrate the heck out of regulators and journalists and analysts. GM pulled a fast one out of its hat – one just wishes the company had plans to pull more than 10,000 out of its hat this year. (One might argue that Subaru of America has been a good deal more clever than GM. The company has sold a combined total of hundreds of thousands of PZEV designated Foresters, Legacies and Outbacks that are “sometimes even cleaner than some hybrid or alternative fuel vehicles,” according to the company.)

“I’ll ask my manager.”

Which is where the Chevy dealers come into this story. Having recently attended a Chevy Volt launch event I visited my local Chevrolet dealer. There was a single Volt on the showroom floor, as promised by the Website. (There are four or five Chevy Volt dealers in the area. Not all Chevrolet dealers qualified to sell Volts.) The car in the showroom had a “Do not touch” sign on it with a message that the car was already sold. Of course, that meant that the car was also locked so that the dealer was not able to give test drives, could not demonstrate the clever on-board and OnStar systems, and could not allow a customer the experience of simply sitting in the car. A salesperson indicated that he did not know when they would get any more vehicles and he was not sure what other dealers in the area had any Volts. I returned home and entered my name on the dealer’s waiting list and was called almost immediately. The salesperson on the phone said four cars were due to be shipped in January and one, a white one, was not spoken for. To reserve this incoming Volt, the salesperson said, I would have to put $5,000 down. I asked about the widely reported $350 lease on the car – an attractive option considering the limited life of the battery. The salesperson said there was no lease available and then he suddenly added that to get the Volt that was coming in January I would have to pay $5,000 over MSRP. There is little that will kill enthusiasm for a new car faster than a dealer charging $5,000 over MSRP. It wasn’t bad enough that I could not drive the car, could not sit in it, could not see it do its sexy technology stuff right there in the showroom.

Whether you want a ULEV, an EREV or a serial-parallel hybrid, you will still need to be prepared to do battle with a dealer who will use your enthusiasm against you. Who knew changing the automotive industry would be so difficult. (For the record, GM and Chevrolet representatives say they have specifically asked dealers NOT to charge above MSRP for the cars and there definitely IS a $350 lease offer on the Volt.)

Further insights: http://bit.ly/gtyxic - EV/HEV Technologies Supply & Fitment Database - Kevin Mak - Automotive Electronics Service http://bit.ly/devMOq - Hybrid Technologies Legislation/Support - Kevin Mak - Automotive Electronics Service http://bit.ly/eC7kFy - Impact of Volt, Leaf Transcends Modest Sales Expectations - Roger C. Lanctot - Insight – 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

Nuance’s Automotive Summit, which took place in Detroit last week, highlighted the leadership position Nuance and one of its most prominent customers, Ford Motor Company, now command in the area of automotive interfaces. While battles may continue to be fought over voice, touch, haptic, and other in-vehicle interfaces, these two companies are positioned at the vortex of the debate leading the charge to develop and deliver safe vehicle interfaces and redefining the automotive branding process. The assumption of this leadership mantle occurs at a time when car makers and their suppliers have been running for cover under heavy fire from regulatory powers in Washington, DC. And the Feds have taken on the added support of lobbying groups and some research organizations. The Federal government’s regulatory arm has stepped into the roadway seeking – like a speed-gun wielding traffic officer – to impede the industry’s headlong advance toward connectivity and smartphone integration in cars. Car makers and the supplier community, by and large, have taken one of two courses. Most have remained silent on the issue of the day – driver distraction – hoping it will either go away or that some white knight, such as the Alliance for Automobile Manufacturers or some other group will calm the waters for them. Others, such as General Motors’ OnStar division, Volkswagen, and QNX have chosen to hit the accelerator. In recent weeks, OnStar has announced its plans to enable Facebook connectivity in the car. Volkswagen and QNX have posted YouTube videos showing early executions of terminal mode smartphone connectivity. These videos show all forms of smartphone images displayed in-dash with no context – ie. no discrimination between what will and won’t be accessible when the vehicle is in motion. In contrast, Ford has been reaching out to regulatory authorities on multiple fronts. The very same week OnStar was announcing Facebook connectivity, Ford representatives – together with Nuance executives – were meeting on Capitol Hill in Washington with legislators explaining the state of the art in voice-based in-vehicle interfaces. Prior to this outreach effort, which is ongoing for both legislators and regulators within the Department of Transportation’s National Highway Traffic Safety Administration, Ford also responded to complaints from the DOT’s now-famous director, Ray LaHood, and altered some of its advertising imaging and messaging. This was LaHood’s first missile fired across the bow of Ford’s Sync interface. The advertising messages are critical. Both Ford and OnStar are running some of the most highly visible television ad campaigns in the U.S. showing off their in-vehicle systems – at a time when both firms are fighting their way out of the steep sales decline of 2009. It is absolutely essential that both companies communicate effectively with so much unwanted attention being focused on these systems and with important sales and market share on the line. OnStar bears the added burden of embedded telematics industry leadership. No other auto maker has taken the embedded telematics approach as far as OnStar which now, after 15 years, has nearly six million subscribers. But with diminished vehicle sales and a virtually unchanged renewal rate, OnStar is facing a potential erosion of its subscriber base. In spite of all it has done to offer compelling solutions to consumers, the company now feels pressure to do more to boost its subscription renewal rates. The company is also swimming against a strong demographic current as GM’s historical customer base has aged. The company is clearly looking to OnStar to not only maintain its previous status as a profitable division by maintaining and adding to its existing subscriber base, but also as a potential source of demographic stimulus to reach out to younger car buyers. GM is not alone in reaching out to younger buyers. Almost every car maker is in a perennial campaign to tap into the next generation of car buyers. And with smartphone purchasing demographics corresponding with this target market, the smartphone connectivity proposition has become essential. (GM and OnStar are somewhat limited by the current vehicle offering which lacks for a robust line-up of small cars targeted toward a younger demographic.) The advertising targets can hardly be missed in the existing television spots which show young people interacting with OnStar systems to obtain location or vehicle information. (A minor pet peeve of this analyst is that it seems that not all these young people, even when they are in the front seat, are seatbelted in the ads – but company executives insist they are all safely secured.) The OnStar television campaign dovetails nicely with GM’s parallel social networking marketing initiatives on Facebook, Twitter and other Web-based communication channels. The smartphone application for controlling vehicle functions and accessing vehicle data on the Chevrolet Volt is another manifestation of these efforts. What is lost in this campaign, though, is the rock solid safety and security message that brought OnStar to this industry leadership position in the first place. Ford has also been youth-oriented in its embrace of connectivity technology. Ford’s ads emphasize the safe use of technology in cars using voice interfacing technology. Watching these ads as a participant in the industry is mesmerizing given the degree of focus on the human machine interface in the car. (While this analyst would prefer the driver not touch the display while the vehicle is in motion, Ford has made clear its adherence to AAM guidelines and the limitations of this functionality in a moving vehicle.) What OnStar and Ford both realize is the need to reach out to younger car buyers. The key motivator here is the need to provide for smartphone connectivity, both for safety and functionality. Younger smartphone, and car, buyers are primary targets for location-aware applications ranging from traffic and navigation to social networking, according to Strategy Analytics research. The drive to connect smartphones is behind the enthusiasm for Nokia’s Terminal Mode initiative along with Apple’s iPod Out, Delphi’s D-Connect, Ford’s AppLink and similar solutions. But only Ford has stepped to the forefront with a vision and implementation of a walled garden-type approach to application deployment. There is a recognition in the industry of the appeal of both smartphone connectivity and application deployment. Ford talks about the beamed in, brought in and built-in strategies for delivering content, applications and services, but the underlying philosophy is control. The power of the Ford solution lies in five value propositions: Distraction mitigation: The voice-based interface minimizes eyes-off-the road time. Demographic targeting: The smartphone interface appeals to social networking young people. Future proofing: The Microsoft-based platform allows for application development and deployment thereby enhancing the value of the solution over the life of the vehicle. Subscription anxiety: The connectivity solution allows the consumer to defer the subscription decision and places the burden of data transport on the consumer’s existing wireless subscription. Branded HMI statement: Ford IS Sync. Ford IS MyFord Touch. The interface has become the brand. A new era in the automotive industry has arrived. At last week’s Automotive Summit, Nuance emphasized all of these points. Whether the solution being shown was the company’s touchpad character recognition, hybrid on-board/off-board speech recognition, enhanced echo cancellation/noise reduction, or focused search all were targeted at reducing distraction while providing a branding pallet for car makers and their suppliers. Presenters at the event, including Nuance executives and partners, pointed to research demonstrating the efficacy of voice and touch interfaces for specific types of tasks. Presenters raised questions regarding interfaces such as BMW’s i-Drive and touch screens generally, favoring voice and console-mounted touchpads (ie. the Audi A8). The consensus opinion appeared to be that touchscreens will survive, thanks in part to Ford’s success in proving the value of the solution. On the other hand, i-Drive-like interfaces will likely continue to come under fire as what one executive described as a “linear keyboard.” Now more than ever, though, rigorous research is being applied to weigh critical HMI decisions and eyes off the road time is more than ever a deciding factor. Conclusions: The next step in the process of realizing the potential of smartphone integration is enabling application downloads. Several solutions have been proposed including: Direct handset display: Nokia Terminal Mode approach. Walled garden: Ford application deployment approach. Application validation: Delphi et. al. provide application validation. Single application: Handset application controlling access to all apps. App store validation: Apple, Blackberry et. al. provide application validation. Carrier validation: See above. What is likely to emerge is a hybrid of on-board/off-board application control shared between the vehicle and the mobile device within the context of an OEM’s walled garden. When available, server resources will assist with application functionality such as search or streaming data or content. But regardless of the source of data or service, the entire solution on-board and off-board will be encompassed by the OEM’s walled garden. The vehicle and data security associated with OEM control will increasingly be non-negotiable. Challenges to this ecosystem are already emerging as application developer candidates for the Ford platform are expressing frustration with the process of putting the Ford software developer kit to work. Ford is seen as slow to respond to developer needs, a problem that is not expected to be resolved soon. OEMs will never be able to move at developer speeds especially where vehicle safety, security and integrity are at stake. So, new voice-based interfaces and Bluetooth wireless connections have enabled a new branding proposition in the industry coinciding with growing demand for safe mobile phone connections, a youth-oriented demographic outreach (particularly in compact car segments), and the need to future proof cars to keep up with consumer electronics market advances. More than ever cars are defined by their human machine connections. Ford and Nuance have much for which to be thankful and many of those thanks ought to be directed to Ray LaHood in the Department of Transportation. Much as most industry executives are want to complain and criticize the DOT for its single-minded anti-distracted driving campaign (when drunk drivers are actually responsible for more damage), the effort has focused consumers on their risky behaviors, opened the door to creative solutions, and stimulated demand following the industry’s worst ever downturn. Additional insight: http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://tinyurl.com/34hidb5 - Smartphone Market Evolution and the Automotive Opportunity Implications - Mark Fitzgerald - Automotive Multimedia and Communications Service http://tinyurl.com/2qx88eo - Automotive Connectivity: Beyond Bluetooth Solutions - Mark Fitzgerald - Automotive Multimedia and Communications Service 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

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

Microsoft intends to clear the air at Convergence in Detroit this week with the launch of Windows Embedded Automotive 7.0, the merged automotive operating system that takes the place of MS Auto and Windows Automotive – in all their versions. An earlier version of the OS, Windows Embedded Automotive, will be featured in the information hub in Nissan’s Leaf electric vehicle, according to Microsoft, and will be joined in the spotlight by Silverlight for Windows Embedded, Microsoft’s alternative to Flash. Also highlighted at Convergence by Microsoft will be Fiat’s plans to bring the Fiat 500 to the U.S. along with its Blue&Me 2.0 (not it's official name) interface with support for the iPod. Ford and Kia will likely be making announcements related to their Microsoft implementations and Microsoft noted its participation in 12 different device platforms over the next 12 months from a number of different car makers reflecting the company’s continuing commitment to the automotive business. The announcements and enhanced presence at Convergence concludes multiple reorganizations at Microsoft which saw the departures of senior executives on the automotive team and a consolidation of all embedded activities under a Server and Tools group. Existing OEM and Tier One partners with Microsoft solutions include Ford, Fiat, Chrysler, Kia, Mercedes, Honda, Nissan, Alpine, Mitsubishi, and Clarion. Microsoft will use Convergence to demonstrate various Silverlight development tools for handling prototyping and to accelerate testing within the development and approval process while allowing OEMs to create executable specifications for suppliers. Tools will also be shown for a thread priority-based tuning system that allows for handling and logging errors during development. Microsoft will also highlight advances in its Tellme embedded speech product, currently being deployed by Kia in the Uvo. The new recognizer can handle eight languages with speaker independence while providing for the tuning of recognition for individual users. Also new for the embedded Tellme is an SMS reply function capable of performing fuzzy logic matches to a set of predetermined responses. Separate from the Convergence activities, Microsoft is pursuing automotive opportunities for its Bing search engine as well as for Tellme as a server-based voice recognizer. Both the Ford and Fiat Microsoft solutions provide for application downloads and updates, though Microsoft has not created its own automotive app store model. The Nissan Leaf information hub is the most significant of the announcements at Convergence. The hub will handle navigation, charging, radio and HVAC functionality in the car. The hub implementation suggests the potential for a wider Microsoft engagement with both Nissan and Clarion. As Nissan moves closer to realizing its connected vehicle vision outside of Japan, the company can be expected to move beyond its current reliance on VxWorks. Conclusion: Microsoft remains a credible alternative to QNX and the various versions of Linux distributions in the automotive industry. The MeeGo operating system created from the merged elements of Nokia’s Maemo and Intel’s Moblin platforms and adopted by the Genivi Alliance is not expected to be available in even a beta version until April 2011. Some Genivi members say an automotive version of the OS may be out before the end of the year. Google and its Android operating system continue to flirt with the automotive industry – playing hard to get. Google is interested in the automotive industry for the emerging search-related opportunities and for the potential to sell traffic and cloud-based location-aware applications, but the company still refuses to certify or support Android for embedded use. In spite of Android’s orphaned status in automotive, Continental and Parrot continue to carry the flag, secure in the knowledge that Android can still claim the largest and fastest growing developer community – key to unlocking app store opportunities. Microsoft’s step by step, implementation by implementation, customer-focused approach has left some customers and potential customers scratching their heads about the company’s long-term commitment to automotive. The headquarters reorganizations continue to raise questions, and yet Microsoft forges on, enhancing and refining its solutions and adding to its portfolio. Just the past year has seen Silverlight and Bing added to the mix along with Tellme. After years of wavering it appears that Microsoft has finally taken its vows and accepted its automotive market responsibilities. By now, the company has learned that the automotive contest is not always won by the swiftest, but by the supplier with the most staying power – and it looks like MS is in for the long haul. Further insight: Smartphone Market Evolution and the Automotive Opportunity Implications – Mark Fitzgerald – Automotive Multimedia and Communications Service - http://tinyurl.com/34hldb5 Automotive Connectivity: Beyond Bluetooth Solutions – Mark Fitzgerald – Automotive Multimedia and Communications Service - http://tinyurl.com/2gx88eo

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

At a time when radio struggles with its role as the red-headed stepchild of the broadcast industry it was refreshing to discover a group of enthusiastic radio marketing executives discussing what the organizers of the event described as the arrival of the fourth golden age of radio. The discussion was occurring at the RAIN (Radio and Internet Newsletter) Summit in connection with the Radio Advertising Bureau event in Washington, DC., this week. Kurt Hanson, CEO of AccuRadio.com and Publisher of RAIN, defined the vision of the fourth golden age of radio as that period following the first (1935-55), second (1960-75 = Top 10, emergence of FM), and third (1976-99, listener fatigue, consolidation). Hanson pointed to Internet radio as a transformative force creating new value for radio advertising and content. For these executives, the hand-wringing regarding the impact (read: threat) of Internet radio is past, replaced by an intensifying embrace of a technology that is transforming the industry. Broadcasters left the event with the newfound conviction that Internet radio was a valuable tool for enhancing their influence and reinforcing their ties to listeners – and the mobile phone and the automobile are increasingly important venues via which to pursue that opportunity. For these broadcasters, the so-called fourth golden age of radio is characterized by the emergence of Internet radio and five aspects defined by the event organizer as: 1.                   Personalization and control manifested in pause, fast forward and thumbs up/thumbs down functionality; 2.                   Variety in the form of thousands of available stations targeted at all forms of regional and genre/sub-genre-based interest; 3.                   Lower spot load – ie. fewer ads – but better targeting of ads – and the corollary of more detailed and accurate metrics; 4.                   Ubiquity – Internet radio is accessible via televisions, mobile phones, standalone radios and, soon, automobiles; 5.                   Global/National reach vs. local – after all, listeners can be anywhere. Internet radio use currently stands at a 3.8% share of radio listening, according to data from Ando Media referenced at the event, representing the equivalent share of radio listening captured by FM radio in 1971. Arbitron data shows the percentage of online radio listening (% who have listened to online radio in the past week) as steady at 17% between 2009 and 2010 (equivalent to 43M listeners). Pandora, the most successful online music provider to date, showed an increase in # of listeners per average quarter hour (AQH) from 257K in January to 366K in July. At the same time the total AQH for the top 20 online radio sources was 780K and the total online radio listening figure was 1.3M. The numbers indicate that Pandora has a 28% share of all online radio listening, according to Hanson, and an overall radio listening market share of 1% - equivalent to 1% of listening in every market in the U.S. The trend, according to Pandora’s own data, continues upward with the number of hours of listening on Pandora growing from 200M in January to 275M in July. And the majority of the increase is coming from mobile users, who now account for more than half of those listening hours. Pandora’s overwhelming brand recognition in the space was reflected both in the listener data and in research presented by Coleman Insights which found Pandora, Slacker and iHeartRadio as the only brands with any significant unaided recognition. The larger message from the Coleman study was that Pandora may have strong recognition but does not yet have a dominant image in the minds of consumers – ie. the market is still fairly fragmented and an open opportunity. The implications for the automotive and mobile device markets come through loud and clear here and in Strategy Analytics’ own data where interest in and usage of Internet radio on mobile devices is on the rise. Not surprisingly, auto makers are seeking to capitalize including front runners BMW, Ford and Mercedes-Benz. Only a year ago, Internet radio in the car was greeted with skepticism and derision for a variety of reasons including: 1.                   Cost – As unlimited data plans begin to disappear, the perception is that Internet radio will become prohibitively expensive to mobile users; 2.                   Network capacity – Cell towers have limited ability to support an unlimited number of data users, which is what Internet radio users are; 3.                   User experience – Capacity and signal issues have created a listening environment carried by drop outs and lost signals. All of these objections have either been resolved or will soon be resolved: 1.                   Cost – Do the math. Taking AT&T’s tiered plan as an example, the $30 for 2.4GB likely represents MUCH more than enough time and bandwidth for all but the most out-of-control mobile listener. Cost is NOT an issue. 2.                   Network capacity – Carriers are adding smaller cells and Wi-Fi access points in major metro areas to alleviate the capacity issues. AT&T complaints have almost (I say “almost.”) completely stopped. 3.                   User experience – There will always be challenges in delivering music consistently, but the creators of these solutions are providing for caching and buffering at the receiving end while broadcasters are filtering content to lower-bandwidth alternatives at the broadcast end. The dominant mode of delivery for Internet radio in the car will be the smartphone in the short term. And with a growing population of smartphones in the marketplace, the opportunity is large and growing. But the concept of an embedded telematics infotainment system with access to Internet radio is no longer anathema in the industry. In fact, the Mercedes-Benz MyComand concept of such an embedded solution shown a year ago at Telematics Munich now looks not only doable but downright prescient. Some bumps in the road remain.  Music service-type Internet radio, such as Pandora and Slacker, will have a user experience advantage over true Internet radio platforms such as RadioTime and vTuner. Because of their personalized nature, Pandora and Slacker will have the advantage of leveraging buffering and caching to preserve the listening experience where cell connections are lost. (Slacker, of course, is primarily a caching-based service and, by definition, won’t lose connection mid-song.) Nevertheless, with carrier network improvements and the transition to LTE technology, the radio aggregators such as RadioTime and vTuner may gain the upperhand by facilitating access to a wider range of content with more creative means to manage and discover new music. RadioTime, for example, has deployed a song search feature able to locate a song being played on any of its participating radio stations. These aggregators also have the advantage of making podcasts and other non-radio content available while also integrating terrestrial sources such as analog AM/FM and HD Radio sources using location data. Competing Radio Platforms It is no coincidence that Sirius XM is making its content available via the Internet. Sirius XM clearly recognizes the competitive threat posed by Internet radio. To respond to the content searching and sorting functions of some Internet radio services and the ability to store or buffer some music, however temporarily, Sirius XM can be expected to bring content management enhancements to its Satellite Radio 2.0 platform due late in 2011. (Sirius XM has raised its subscriber guidance, forecasting 20.1M U.S. subscribers by the end of 2011.) Sirius XM already offers smartphone app functionality already widely deployed by Internet and terrestrial broadcasters. (In fact, much of the talk at RAB revolved around leveraging these apps for advertising and promotional engagement with the listener.) But with the enhancements in satellite radio requiring further hardware investments by OEMs, Sirius XM will have to continue to subsidize its OEM customers. HD Radio will continue to see widening deployment via automotive OEMs, especially since the required hardware investment is substantially less than for satellite radio. According to a recent Twice magazine report HD Radio is built into 5% of new cars sold in the U.S. reflecting deployment by 15 brands on 86 vehicle lines and as standard equipment on 36 car models. There are 2,085 converted stations and 1,226 multicast channels. More than  3M HD systems of all types have been shipped, according to iBiquity Digital, and efforts are underway to see HD Radio technology integrated in handsets. Conclusions The two challenges for OEMs will be to monetize the Internet radio opportunity and to solve the user interface challenge of accessing multiple radio sources safely in a vehicle. From a monetization standpoint, the goal will be to enable users to purchase songs and to enable access to premium content. In addition, the integration of Internet radio into embedded systems will make a powerful and positive contribution to the perceived value of telematics infotainment systems. Smartphone integration continues to advance and a variety of approaches will be tried, no single one of which is likely to dominate. As an example, BMW’s Mini Connect integration reproduces the smartphone display in the instrument cluster, while the solution in the 1 Series lets the driver use the smartphone’s interface. The latter approach is used by Mercedes in its Smart integration product. The bottom line is that Internet radio in the car is much closer to a reality than it appeared just 12 months ago, and it will likely contribute positively to convincing consumers to pay for telematics systems. 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 http://bit.ly/bD5RzL - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority - Blight - Automotive Multimedia & Communications