When executives heard about Verizon’s acquisition of Hughes last year they laughed, they gasped and then they applauded.

They laughed because $612M sounded crazy. They gasped because they realized that Verizon was very serious about telematics, maybe more serious than anyone realized - $612M serious. And they applauded because it was good news for every other company in the space looking for an exit-strategy story to tell their investors and boards.

It has happened again, this week, with Google’s reported acquisition of Waze for an estimated $1.1B. Observers laughed and scoffed – myself included. We gasped. And, now, we applaud.

Google will soon be telling us why it made this acquisition.  The available reasons include:

·         Access to Waze’s crowdsourcing platform for location information which offers a level of engagement with users that exceeds in depth anything Google has achieved with its various properties;

·         Access to Waze’s engagement with media – broadcasters such as ABC have demonstrated a strong interest in Waze’s traffic information – especially its personalized elements (Has “waze-er” made its way into the dictionary yet?);

·         And 47M+ users globally is nothing to sneeze at.

What is the impact of this acquisition?

Traffic information services are inherently social.  Waze was the first organization to not only recognize this insight, but to aggressively put it to work.  And when driver distraction became an issue, Waze found a way to enable traffic reporting by waze-ers in a hands-free, non-distracting manner.

INRIX has its partnership with Aha for reporting traffic incidents in real time via the Aha Radio app.  Multiple organizations capture probe data to report traffic flow in the aggregate.  But with the exception of InkaNet in China, Waze was the only company that allowed one user to see the progress of another user on the road.

Waze-ers (apologies to Diann Eisnor) gained recognition, particularly during Los Angeles’ Carmageddon construction project on the 405 (fears of a traffic calamity did not pan out, though Waze was prominently featured by local television traffic reports trying to help hapless drivers).  At each step of the way Waze showed the power of a very personal connection with drivers including gaming elements and reporting of real-time events on the road.

Some car makers already understand the power of probes, as Audi, Ford, Toyota and BMW have partnered with INRIX to capture and share vehicle probe data to enhance their own traffic information services.  But even these forward looking organizations have failed to deliver the personal touch.  (Fiat’s Eco-drive does offer some game-play and community elements, though not in real time. 

The next step will be to build embedded platforms capable of capturing and uploading on-board camera and sensor inputs in the event of a “delta event” while driving.  Cars with embedded telematics systems ought to leverage historical data such that they are able to identify when traffic conditions are out of the norm and automatically capture and transmit relevant on-board data. 

With its market advantage in aggregating probe data from embedded telematics systems, INRIX is perhaps the greatest beneficiary of the Google acquisition – especially in light of its upcoming IPO.  Other valuation beneficiaries ought to include navigation providers (deCarta, TeleNav, Navmii, Fullpower, Nokia, TomTom), though none of their stocks rose. 

But, finally, the billion-dollar acquisition of Waze by Google ought to be a big heads up to every car maker.  From GM/OnStar to Toyota, Volkwagen, Hyundai and Geely, the embedded connection in the car represents an extraordinary opportunity to connect to the customer for the purpose of delivering a personalized traffic information experience.

As I have said and written many times, traffic information is the single most important telematics application.  Car makers implementing telematics must leverage vehicle probe data to enhance traffic information services.  And personalizing that service by allowing real-time reporting – either in an automated or in an ad hoc hands-free fashion – will deliver immense value to the customer AND stockholders.

Google and its self-driving cars (SDCs) are scaring the wits out of the automotive industry. There’s nothing major car makers would like to see more than a swift departure of Google from the automotive domain. The next best outcome for auto makers, therefore, is to discourage or delay Google-led initiatives like SDC.

The National Highway Traffic Safety Administration has come to the rescue with guidelines for states in the U.S. that may be considering allowing self-driving cars to operate. (Google has stated that it does not support the NHTSA guidelines.)  These guidelines boil down to:

·         Simple transition from automated to driver control

·         Be able to detect, record and inform driver if the system malfunctions

·         Technology does not disable federally required safety features

·         Records information in the event of a crash

More details are available:  http://tinyurl.com/n2j5rpr

There are currently two paths toward self-driving cars.  One path, the one with which more consumers will be familiar, is the path defined by Google’s autonomous car – and already familiar from multiple DARPA-led challenges where various organizations and university programs create autonomous vehicles competing to cross the desert or operate in city traffic.

The other self-drive car path is based on 802.11p DSRC (Dedicated Short Range Communication) technology – now being tested at the University of Michigan Safety Pilot study - http://safetypilot.umtri.umich.edu/.  DSRC is the technology behind vehicle-to-vehicle and vehicle-to-infrastructure technology intended to enhance vehicle safety by creating a network of vehicle communication for the purpose of eliminating all driver-related collisions or approximately 80%-90% of accidents.

As a result, what is emerging is a private initiative currently “led” by Google – as the first company to put a self-driving car on the road – competing with a vision of autonomous driving ultimately enabled by a government mandated DSRC module.  NHTSA’s recommendation that states only allow SDCs for testing purposes only for the next four years buys time for the auto industry to “catch up” with Google’s massive headstart in the marketplace and the minds of consumers.  (Audi notably has its own autonomous car operating in the U.S.)

While the Google car is notorious for its use of a rooftop lidar device reportedly having a cost of $70,000, the expectation is that the size and cost of this hardware will both shrink rapidly.  Meanwhile, NHTSA is pushing toward the eventual mandate of a DSRC module in every car intended ultimately enable self-driving cars along with a range of other applications focused on safety and traffic management.

The auto industry’s response to Google’s private commercial initiative was evident in survey results released last week at the Telematics Update 2013 event.  The Alliance of Automobile Manufacturers (AAM) released survey results showing that 33% of consumers think the idea of self-driving cars is a good one, but the AAM chose to focus on the 42% of respondents who said it was a bad idea.  A further 24% were unsure what to think.

To this analyst, the idea that any consumers at all viewed self-driving cars as an attractive proposition is big news.  It’s not as if Google launched its car in response to overwhelming demand.  The move was an intuitive one driven by personal experience – more and more people find driving intrusive and unpleasant and will welcome the SDC concept.

The AAM findings go on to report that 75% of respondents said they were very concerned that companies would collect personal data and 70% said they were very/somewhat concerned this information would be shared with the government.  AAM also said 81% of respondents reported they were either very or somewhat concerned that hackers could gain control of self-driving cars.

The irony here is that a Google-type SDC is far less likely to be sharing data with the government or to be exposed to hackers than a car with a government-mandated DSRC module.  Who is a consumer more likely to trust these days:  Google, with whom hundreds of millions of consumers are already sharing their data; or the government (ie. NHTSA), which has recently been caught in a range of over-reaching personal information intrusions in recent weeks.

My money is on private, commercial initiatives, such as those driven by Google, Audi, Continental and other car makers and their suppliers.  The impact of the government mandate approach has been to narrow the field of potential participants in the DSRC space, freezing out innovation and investment.

Further working against the long-term success of DSRC has been the inability of the leaders in the space to find and adopt practical applications for the technology.  In 10 years there has been little or no commercial deployment of the technology.  It appears that even the Federal Communication Commission in the U.S. – the agency responsible for allocating the required spectrum – has lost patience with the NHTSA program – choosing not to “protect” the spectrum from unlicensed use.

The first green shoots of DSRC deployment are beginning to appear, with Kapsch announcing a self-parking implementation for commercial vehicles.  Let’s hope this is just the beginning.  Next steps ought to include deployment of DSRC on emergency vehicles (for intersection collision avoidance – 9,000 people killed annually in the U.S. at intersections) and fleets.  But 10 years of testing with no deployment raises serious questions regarding the management of the DSRC program.

NHTSA and AAM ought to be fostering not discouraging development and deployment of SDC technology.  Telling states to shift into a testing-only mode is hardly the kind of bold innovation-fostering push the industry needs.  With 33% of consumers telling AAM they think SDC is a good idea, it is clear there is a market for the technology.

Simple directives are best.  All NHTSA really ought to say at this point is that a driver must be in the driver seat at all times and the driver is still responsible for the operation of the vehicle.  One sentence, rather than 14 pages of regulatory hoo-hah.

A battle is erupting over the $400B vehicle repair and maintenance market in North America and the clarion call to arms was sounded at the Automotive Aftermarket Industry Association’s (AAIA) Aftermarket eForum last month.  AAIA is sounding the alarm well ahead of the anticipated assault by OEMs, which AAIA perceives as leveraging telematics technology to apply a stranglehold to their aftersales business.

Though slightly premature, AAIA’s concern is real and the organization attributes its decision to raise the alarm to the emergence of embedded telematics and smartphone solutions in cars that are expected to cement the customer’s devotion to his or her dealer for service and repairs.  The irony here is that forces are afoot in the industry to deliver precisely the opposite value proposition – leverage vehicle diagnostic data (openly available via OBDII port connections) to enable an open market for vehicle repairs from which independent shops will benefit.

Before detailing emerging disruptive solutions it is useful to understand the current state of play in the automotive aftermarket, especially as regards embedded connectivity and smartphones:

OEMs – Car makers have only slowly begun to recognize the value of gathering and interpreting vehicle diagnostic data.  OnStar has famously led the way in this area, making use of its connected captive fleet to anticipate potentially expensive problems prior to vehicle launch.

OnStar has yet to completely embrace and use vehicle connectivity as an end-to-end diagnostic solution capable of being applied to supply chain processes during production and delivery of its cars.  Similarly, OnStar has left dealers out – failing to provide dealers with vehicle management tools such that GM dealers could use the telematics system to manage their customers as if they were fleet managers.

GM has taken the step of making a monthly vehicle health report available to the consumer and alerting dealers to diagnostic trouble codes from the vehicle.  But neither dealers not consumers have control of the information and, indeed, information access is limited either online or via smartphone apps.

Ford has yet to completely embrace the concept of embedded connectivity, but Ford has a smartphone-based application that enables the customer to obtain a fixed set of vehicle diagnostic information at the touch of a button in the car.  The button push produces an email with a diagnostic report on the car which is also transmitted to the customer’s preferred dealer and to Ford’s own engineers.

The Ford solution is attractive for allowing access to the information on demand, but it is reliant on email communication of the vehicle information and lacks real-time elements such as an explanation of the problem in the car or the provision for scheduling a dealer visit should one be necessary. 

Mercedes-Benz’s mbrace2 allows the customer to request a “ping” of the vehicle’s diagnostic data in real-time which can then be interpreted at that moment by a call center representative.  Mercedes does not provide for an on-board service scheduling capability, though the call center operator is presumably capable of contacting the dealer on the customer’s behalf. 

BMW’s TeleServices connected service will alert the dealer to scheduled maintenance, after which the dealer is obliged to contact the customer to schedule an appointment.  In the event of a diagnostic trouble code that triggers a message in the dashboard, the dealer is not notified and the customer must depress the in-car SOS button to summon assistance.  If the customer presses the SOS button, then BMW and the dealer will receive the diagnostic information. 

Hyundai is the most advanced car maker in the customer relationship space.  The company’s BlueLink embedded telematics solution enables real-time scheduling of dealer service appointments based on scheduled or unplanned repairs tied to in-vehicle alerts with the help of partner Xtime.  The cloud-based application enables a VIN-specific engagement with the customer along with integration with the dealer management system and access to a comprehensive database of diagnostic trouble codes and correlated service requirements including hours, parts and processes.

Hyundai is also the only OEM that is provisioning its on-board modem early enough to use it as a supply chain tool either during production and delivery or at least post-production.

In broad terms, the OEM threat to third party service providers, though real, is only just beginning to emerge.  Car makers are still coming to terms with core issues such as:

A - The opt-in participation of the customer in sharing vehicle data

B – The sharing of vehicle data with the customer on an ad hoc, on-demand or real-time

basis

C – The sharing of vehicle data with the dealer on a real-time basis

D – The use of vehicle connectivity data as a comprehensive, supply chain proposition

E – The use of vehicle data for customer retention purposes

Most OEMs with smartphone application integration are offering remote access to vehicle functions such as remote start and pre-conditioning.  And most EVs come with a smartphone integration solution that allows the user to determine the battery’s charge status remotely.  But more complete smartphone-based diagnostic tools have not yet arrived on the market. 

Aftermarket – Given the alarm expressed by AAIA at the threat posed by OEM customer relationship initiatives, it is the aftermarket that is making the greatest strides in enabling powerful customer connections intended to help obtain and retain aftersales business.  A growing portfolio of OBDII devices from Verizon (Delphi and Hughes), Audiovox, CarMD, GoPoint, Mavizon, CarShield, and Automatic, along with a host of usage-based insurance offerings are creating new opportunities to engage with customers via smartphone apps and/or customer-facing portals.

An another emerging layer of companies with such names as Vehcon and AutoAdvantage are creating smartphone-based platforms for service engagement designed around opening up service opportunities to third parties.  And there are general purpose diagnostic devices or applications from startups Automatic and Dash Labs, forensic-oriented offerings from companies such as Lysanda, and collision-oriented devices from companies such as In-Car Cleverness.

In fact, the veritable flood of aftermarket products in the market or coming soon promises increased awareness among consumers of the lowly OBDII port.  Whether consumers will embrace the opportunity attach these devices to their cars remains to be seen.  And there is no question that the companies offering these products will have to provide for periodic removal of the device to allow multiple devices to be plugged in at different times.

In the U.S., and in other markets, the battle lines are being drawn over what are called “right to repair” laws.  The state of Massachusetts was the latest entity to pass such a law requiring car makers to share vehicle diagnostic information to enable third parties, or even do-it-yourselfers, to access the codes and software necessary to fix increasingly sophisticated automotive systems.

The next stage in this battle is a growing clamor among independent dealers and the aftermarket industry as a whole to have access to diagnostic trouble codes in real time.  A new vehicle service paradigm is beginning to emerge in this context where service exchanges might emerge where diagnostic trouble codes are gathered and made public, in real time, and independent servicers are able to bid on the repairs.

In fact, one might imagine such an exchange residing in his or her dashboard or manifesting on a smartphone app in real time.  Engine light trips on and almost instantly the driver is provided interpretive information and a quote for the repair from the dealer and a couple of local independent shops.

Of course, it is important to remember that it was not so long ago that an embedded navigation system in a BMW would not even allow the driver to locate nearby Mercedes-Benz dealers from the on-board POI database.  But the opening up of vehicle connectivity, while creating new customer retention opportunities, may also open the door to increased opportunities for third-party parts and repair organizations.

The AAIA has it right.  A battle for the hearts, minds and service appointments of drivers is emerging – especially as cars last longer and longer – more than 11 years on average, according to R.L. Polk’s latest data.  The aftermarket is winning the arms race.  But OEMs are slowly awakening to the risk to their customer relationships.

Rumors ran rampant last week, and the week before, that Facebook and then Google were in talks to acquire Waze, the Israel-based crowd-sourced navigation solution, for approximately $1B. The price may be about right but the acquisition target is wrong.

All arrows are pointing in the direction of R.L. Polk and Carfax as the next big automotive acquisition.  Industry sources suggest that R.L. Polk is the more likely acquisition target, primarily for its CarFax division. For several months it has been known that R.L. Polk is exploring strategic options, including the sale of Carfax or even an IPO.

Potential acquisition candidates cited in press reports include Automatic Data Processing (ADP), Reynolds and Reynolds, Dealertrack Technologies, KAR Auction Services, McGraw-Hill Cos, J.D. Power and Associates, Cars.com and Cox Enterprises, which owns AutoTrader.com. AutoTrader.com has likely taken itself out of the running after announcing a marketing relationship with Experian which owns Carfax vehicle history report (VHR) competitor AutoCheck.

The road to an acquisition was recently rendered a bit rocky by a lawsuit being threatened by a dealer franchise attorney – Leonard Bellavia – on behalf of automobile dealers challenging the alleged monopolistic tactics of Carfax including exclusive agreements with OEMs and others locking in premium charges for VHR for certifying used cars. The Carfax service is used widely by OEMs as well as by Cars.com and Autotrader.com. One of the most galling elements, of course, is recent television ads that not only encourage consumers to “ask for the Carfax” vehicle history report, but that disparage dealers who don’t make the information available.

Lost in the news of the potential R.L. Polk sale and the threatened lawsuit is the actual treasure-trove of data that Carfax represents. Carfax has compiled what it describes as 11 billion vehicle records from 44,000 sources across North America including VIN-specific service histories and diagnostic data.

In February, Carfax launched its Carfax Service Network designed to help dealers better target service opportunities by leveraging the massive Carfax database. In case anyone failed to get the message, Carfax noted that the Automotive Aftermarket Status Report of the Automotive Aftermarket Suppliers Association identified an estimated $60B in “manufacturer-suggest maintenance (that) goes unperformed every year.” Carfax is offering to help dealers and independents better target those opportunities.

But even more essential than that, to a Google or Facebook, is the VIN-related data including owner information that can be leveraged for better targeting of advertising. As if Google and Facebook didn’t already know enough about the users of their services for the purposes of targeted messages, the acquisition of Carfax will enrich these organizations with mine-able data regarding the average person’s most expensive asset.

By comparison, Waze has a crowd-sourced map that neither Google nor Facebook need and a user population that is miniscule relative to the existing user base of either Google or Facebook. And Waze has failed to solve the location-based marketing/advertising challenge in a material way capable of having a transformative impact on either Google or Facebook.

This is not to say that Waze is unpopular. Waze is the go-to navigation solution for tens of millions of users around the world.

But Carfax is a play for immediate revenue, a recognized and powerful brand, a massive mine-able database, and a roster of contractual relationships with OEMs, dealers and independent shops that promises ongoing returns. But, most important for Google and Facebook, is the synergy of the Carfax database with Google’s and Facebook’s existing resources and advertising model. No other potential acquirer has as much to gain from a Carfax acquisition as either Google or Facebook.

Usage-based insurance is a consumer deception. It is a shell game being foisted on consumers to lure them into allowing their car insurance company to glance over their shoulder as they drive and determine their insurance rate based on direct observation of their driving behavior.

UBI programs will no doubt be the focus of the upcoming Insurance Telematics Europe 2013 event in London May 7-8. The focus on UBI at this event is appropriate as the UK remains a source of critical leadership in bringing UBI to the mass market, something that has eluded all other geographies, including the U.S.

The failure of UBI programs to capture the imagination of the consumer lies in its deceptive quality.  The deception lies in the assumption that insurance companies know anything about what constitutes safe driving. But it is actually worse than that, because insurance companies are only allowed to use a limited set of data, depending on the regulatory jurisdiction, to draw their underwriting conclusions.

The attraction of usage-based insurance, or UBI, is that it is a potentially superior tool for determining rates than the existing models derived from driving history, credit scores, and demographic data.  UBI is also attractive to insurance companies trapped in a low growth increasingly low margin industry, because it allows them to draw away the lowest risk drivers from competitors while giving longer term customers a reason not to change.

Regulatory authorities and governments also like UBI programs because the participants tend to drive less, reducing congestion, carbon emissions and the potential for collisions and expensive claims. For young drivers or drivers with poor driving histories UBI programs, allowing remote tracking or monitoring, may be the only means of obtaining affordable insurance.

Strategy Analytics' own research has shown the highest level of interest in UBI programs among younger demographic segments in Europe and the U.S.  (Consumer Interest in Usage-based Insurance - http://tinyurl.com/blfq84q)

In Europe, where regulators have banned gender bias in car insurance underwriting, UBI may be an attractive work-around. And pay-as-you-drive programs based almost entirely on mileage, have also emerged for drivers who simply don’t drive much and, therefore, shouldn’t have to pay the same rates as those who drive more.

But the shortcomings of UBI programs are many and those shortcomings have limited the adoption of the technology to a few million users globally. At the core of consumer resistance is the surrender of privacy inherent in allowing the tracking of driving behavior. For the customer, UBI can be a crap-shoot – a 50-50 proposition that participation will actually produce a meaningful discount.

The offered discounts range from 5% just for the initial participation to as much as 40% based on the results of the tracking analysis. But some drivers will not qualify for any discount which can create a quandary in the event of a program using a tracking device that has been permanently installed (as opposed to an easily removed OBDII plug in), or in the case of a dealer or car OEM brokered offer that produces no discount. In the event of the former case the device may have to be uninstalled at a cost to the consumer, and in the latter case the customer may harbor bitterness toward the car maker or dealer.

But the basis for the discounting is specious. The most commonly cited factors are mileage, acceleration and hard braking. Some country and state regulators have banned the use of speed information for rating and we have already noted the restrictions on gender in Europe.

A recent conversation with a BMW executive had me questioning the entire UBI proposition. BMW will never participate in UBI offers, he said, because penalizing drivers for hard braking or acceleration is antithetical to BMW’s vaunted “ultimate driving” experience.  If BMW drivers participate in UBI programs and are, therefore, discouraged from hard braking or acceleration by their insurance companies, it undermines many of the pleasurable principals of driving a BMW in the first place.

But this is not just a BMW issue. An executive for a large multinational insurer recently questioned – in a personal conversation – the relevance of “hard braking” as an underwriting criterion.  Sometimes hard braking is a life-saving decision or an effective or appropriate reaction to an urgent or dangerous driving situation.

Many drivers have described to me the potentially harmful result of being forced to think twice or three times about accelerating or braking because of the presence of the tracking device on their car.  And I have yet to find a driver that is fond of the annoying beeping sound emitted by Progressive Insurance’s SnapShot device during what the device determines to be a hard-braking moment.

The Solution

My brother was visiting me recently and I told him about the tracking device I had installed in the OBDII port of my car for the purpose of qualifying for a lower insurance rate. His immediate response was: “Why don’t they just use your phone?” With those words my brother captured the very crux of the barrier between a potentially user friendly solution capable of empowering the customer and an annoying and invasive offering fraught with frustration and built to produce disappointment.

The most prevalent UBI offerings around the world require an OBDII plug in that attaches to the diagnostic port available on most, though not all, cars around the world. While the device and the port into which it is to be inserted are relatively simple to understand, the process is not user friendly.

Getting the device to the consumer generally requires the delivery of a product that has been programmed to work with the specific brand, model and year of vehicle to be insured. The hardware may be the same, but the software is not.

The process also assumes that the consumer will be able to locate the OBDII port, also a relatively simple exercise, but not very user friendly given the normal requirement of peering around under the driver’s side of the dashboard. OBDII ports were conceived to enable service technicians to attached diagnostic devices, not for insurance companies to track driving behavior and vehicle performance.

But that is just the hardware side of the proposition. Getting to the delivery and installation of the hardware device assumes that the consumer has accepted the proposition of sharing his or her data with the insurance company and, for that matter, any marketing partners with whom the insurance company may have hooked up.

Actual ownership of the data in most cases appears to lie with the insurance company. And the legal implications of that data ownership are less than clear in the event of an accident. As my disclosure statement states: “You release (the provider of the UBI device and service) and (the insurance company) from any liability associated with the disclosure of information gathered through (the UBI program).”

The problem at the core of the UBI value proposition is twofold: privacy and data portability and ownership. Many consumers have discovered that staying with a single insurer for too long – with a clean driving record and a related low rate – can make switching difficult. The new insurer won’t have access to the claims (or lack of claims) history that has produced such a low rate and will be, therefore, unlikely to match that rate.  This is different in the UK where claims history is centrally available. (Lesson #1 – you ought to switch your car insurance occasionally – or often? – to ensure you obtain the best rate.)

Carriers in the UK have been creating apps to enable consumers to get a preview of their potential UBI discount, but these apps do not solve the problem of complete consumer data ownership.  The very concept of consumer ownership of driving history data has yet to be seriously presented as a value proposition by either insurers or wireless carriers.  Perhaps with data ownership individual consumers could specify which driving attributes they care to share.

Data portability is the proposition that is actually being enabled by UBI programs but it is a concept that few insurers are embracing. In an ideal world, a customer that has gone to the trouble of installing a tracking device on his or her car ought to have ownership of the resulting data and the ability to take that data to another carrier for a competitive quote.

Here, the UK is taking the lead. Just as UK car insurers have led the way in UBI programs intended to defeat rampant fraud, and just as Norwich Union in the UK was one of the first insurance companies to use the Progressive approach to UBI insurance, an emerging insurance industry service provider in the UK, Ingenin, is poised to disrupt the entire insurance industry, not just car insurance.

Perhaps not surprisingly Ingenin’s plan revolves around leveraging the smartphone and all of its sensing capability for determining driving behavior along with a lot of other usage information that may be relevant for other forms of insurance as well. In fact, Ingenin’s proposition not only provides a platform for tracking driving behavior it enables the capture and delivery of information for roadside assistance or crash investigations.  And the Ingenin vision also calls for alerting drivers to known hazardous conditions or accident hotzones in real-time via the smartphone.

Even more significant, Ingenin is seeking to leverage voice and facial recognition to tie the insurance to a particular driver not just to the vehicle. Ingenin has yet to announce a major partner. In the meantime, the company is continuing work on bringing its vision to life.

In the end, it may take the use of the driver’s smartphone to deliver a personalized, empowering, and portable insurance proposition capable of transforming UBI insurance into a mass market phenomenon. Consumers are much more comfortable with and accepting of sharing their personal information via their phone – something they are consciously or unconsciously doing every day.

Nothing about current UBI programs is user friendly. In fact, everything from the hardware and software to the disclosure statements and privacy surrender are fairly hostile and opaque.  The use of smartphones as in the case of Ingenin can change all that.

Returning to Brazil for the first time in a few months I was struck at the paucity of technology in the taxi cabs. Having recently been at the Consumer Electronics Show in Las Vegas I was accustomed to everything from smartphones and GPS devices to cameras, sensors, backseat advertising displays, and payment terminals in cabs. Suddenly, in the land of the vehicle immobilization mandate (Contran 245) I was confronted cab after cab with nothing but a dispatcher and fare machine.

That is, until yesterday in my cab ride from Garulhos Airport in Sao Paulo.  According to the driver, the taxi that took me and my wife to our hotel was part of a 500-cab trial of a backseat tourist aid that was a real revelation and nothing I had seen anywhere before.

Put together by a local company, Comtecno, for the Brazilian Ministry of Tourism (and also available in Recife, where the World Cup with be contested), the device was a Samsung tablet computer equipped with cellular connectivity.  Comtecno calls the device the Multitoky Mobile and the company has as its goal deployment at 14 Brazilian airports for a total of 12,000 devices.

The tablet was unobtrusively strapped to the back of the cab driver’s seat, and I wouldn’t have noticed except for the fact that I am on the constant lookout for in-car tech.  The device charges while in the pouch and its use requires no assistance from the driver.

I immediately grabbed the device, figured how to open the browser and accessed a couple of email accounts.  Before long my wife and I were checking out local tourist attractions and restaurants and peppering the driver with questions.

“Do people like it?”

“Yes.”

“Do you ever use it yourself?”

“Yes.”

“How do passengers use it?”

“To help tell me their destination.”

“Do customers have any complaints?”

“The connection is slow.”

“Will it play video and audio?”

“Yes.”

With only 500 cabs as part of the test it was not surprising that the only overt advertising on the device appeared to be public service announcements warning tourists against sex tourism and people trafficking.  Coming in to Sao Paulo one could imagine a few more pointed warnings, but overall the device was a true joy to discover in the rear seat of our cab and a promise of future innovations to come.

Given the relatively high crime rate and the country’s position as have the third highest number of highway fatalities, one could argue for the implementation of cameras for anti-theft and fraud, along with sensors for maintaining vehicle distance in traffic.  But, generally speaking, the cab drivers are some of the best drivers in Brazil.  (A good contrast is China where there is little respect for lanes, let alone other vehicles.)

But if a Samsung tablet in the rear seat – tethered by a security link – is a first step on the path to vehicle connectivity in Brazilian taxi cabs, it is highly welcome.  It is far superior to the annoying embedded backseat advertising displays found in Las Vegas, New York City and Shanghai, among other cities. 

The rotating messages on these backseat screens are entirely without any merit as far as helping to educate either visitors or locals regarding popular local businesses or for providing informational traveler alerts.  Anyone who attended CES in Las Vegas is likely sick and tired of hearing Steve Wynn tout his gambling properties – a fact reflected in the reflexive tendency of most cab drivers to try to at least turn off the volume on the device even if they could not stop the video.

Kudos to Comtecno and the Brazilian Ministry of Tourism and the for conceiving a creative solution for connecting with tourists.  The next step will be to enable all types of transactions, including perhaps paying cab fares.  Of course, Brazilian cab drivers are still talking on their mobile phones too much and, occasionally, watching video both while parked and driving.  Oh, well, they can’t get everything right all at once.

When visiting Shanghai a couple months ago I was struck by the fact that multiple auto dealers visited during my stay did not have cars available with activated telematics systems.  This meant that the dealer was not able to demonstrate the technology to customers virtually guaranteeing consumer apathy.

This past week I was visiting car dealers in Italy and discovered a new barrier to consumer adoption, cars without power in the showroom.  Now I am the first person to acknowledge that consumers put a greater emphasis on style, drive and price than they do on infotainment and telematics (see attached slide), but cars without power in showrooms seems absurd in an age when the electronic and software content in cars is on a steep rise relative to the value of the vehicle.

These incidents were shocking to me because I experienced the telematics disconnect in multiple dealers in China (FAW Toyota, Nissan, BMW) and the power failure in multiple dealers in Italy (Fiat, Volkswagen, Hyundai).  The Chinese experience was exceptional because in the past I have had successful telematics demonstrations at Buick, Cadillac, Toyota, Lexus and Roewe dealers.

At the time of my visit to Shanghai, the dealer said that there was only one BMW in all of Shanghai that had telematics service provisioned for the purpose of providing a customer demonstration, but that vehicle was located on the opposite side of town.  The Nissan and FAW Toyota dealers simply had not activated any of their cars.  The only similar experience from my past was with Roewe’s Inkanet-equipped 350 which was most often lacking power on the dealer floor because the Android-based infotainment system had drained the battery.  (Roewe eventually installed Inkanet demonstration kiosks with their own power.)

The experience in Italy was surprising for the manner in which it was discovered.  The hatchbacks of many of the cars – which close electronically – were all ajar, not completely shut.  The natural instinct when one sees a door that is not fully closed is to give it an added shove or open and close it again.

Attempts to close these hatchbacks brought either a panicked or slightly amused response from the dealer sales person who had to explain that the hatch was powered and, when left on, tended to drain the battery in the showroom rendering the feature useless and the hatch not “closable.”  Usually the dealer had taken the added measure of wrapping paper or cardboard around the latch to prevent damage from customers trying to slam the hatches shut.

Is this problem emerging because cars are sitting too long in showrooms unsold?  Are dealers trying to avoid paying steep electric bills?  Not likely.

What is more likely is that dealers simply consider the electronics in the car to be a low priority, a fact that is borne out by Strategy Analytics research (http://bit.ly/XLOWpJ - Vehicle Purchase Behavior and Priorities of Chinese Consumers).  They have either reached this conclusion on their own in reaction to customer behavior or they are responding to a lack of auto supplier focus on selling sophisticated infotainment systems.  The danger, of course, is that dealers are following the lead of the factory.  If OEMs are not making a priority of infotainment systems then low attach rates and low customer satisfaction scores will result - ie. a self-fulfiling prophecy.

It may also be that dealers don’t want to engage in resolving consumer confusion regarding smartphone connections, voice recognition, navigation systems and apps.  Years ago Fiat was touting Blue&Me with point-of-purchase materials throughout much of Europe, but Blue&Me signs are no longer present in Fiat dealerships in Italy.

The picture is even more complex for Fiat, given the presence of Garmin, TomTom, and Magneti Marelli/Wind River navigation system options on its cars.  But Volkswagen has a growing range of infotainment options, as well, none of which could be demonstrated at the dealer visited in Italy.

The one exception encountered during this brief dealer tour was Hyundai.  Hyundai had a large sign touting the special edition of its i20 with a Pioneer infotainment system (the Aha Radio) enabling connection to a customer’s iPhone to access content and applications.  The dealer opened the hood to engage the battery to enable the demo, which amounted to a self-demo of the system which paired quickly and streamed audio via the supplied cable.

The sad reality is that solutions exist for both the telematics system provisioning problem in China and the power failure in Italy.  But the message is clear.  Selling infotainment and telematics systems introduces a new challenge to the process of selling cars – calling attention to power requirements, user interfaces, smartphone connections and apps.

Car makers from Ford and GM to BMW and Hyundai have introduce special dealer training programs and even Apple-like genius bars to bring customers – and dealers – along on the technological journey.  Clearly more guidance and support are needed if the industry is to achieve success with connected cars.  But making sure cars in showrooms are powered and that embedded telematics systems are provisioned seems like pretty basic stuff at this stage.

“Gentlemen… We have the technology…” paraphrasing Richard Anderson in character as Oscar Goldman in the opening sequence of “The Six Million Dollar Man.”

In the U.S., three times as many people are killed in accidents that occur at intersections than are killed as a result of distracted driving. The technological remedies for this highway holocaust exist, but traffic authorities continue to be distracted by short-term fixes of dubious efficacy (red-light cameras) and daunting budget barriers.

This issue has particular resonance now that U.S. Dept. of Transportation Director Ray LaHood has announced his departure.  A new director will be resetting the agenda of the National Highway Traffic Safety Administration (NHTSA) and intersection accidents ought to be high on the priority list. 

The issue of intersection safety has implications for fuel efficient driving and the coordination of urban traffic grids.  Some of the key applications for NHTSA’s proposed vehicle-to-infrastructure communication (using dedicated short-range communications – DSRC – technology) are built around the timing of traffic lights to ensure the smooth movement of traffic, the reduction of congestion and emissions, and the prevention of accidents.

Two innovative solutions (and a Federal study), take quite different approaches to meeting these challenges and highlight the use of smartphones and existing wireless technology, while also raising questions about the ability to transition the current fragmented traffic light infrastructure in the U.S. and elsewhere to DSRC technology.  (A more detailed discussion of this issue is available to Strategy Analytics clients at: http://bit.ly/VWQEBx - Vehicle Safety at the Crossroads – Literally.) 

The two solutions come from Global Mobile Alert and Green Driver.  The Federal study is being conducted by the Federal Highway Administration (FHWA). 

Global Mobile Alert has patented (http://bit.ly/XfZCdQ) the use of either an on-board or off-board map accessed by a mobile phone to alert drivers who are using the phone to hazardous conditions ahead including intersections, railroad crossings and school zones.  Alerts and messages to the driver can be tailored to the nature of the hazard. 

Global Mobile Alert has further patented the use of wireless communication between the traffic light and a mobile device to determine the phase of the light in relation to the speed of the car in order to alert the driver, particularly in the event of the mobile phone being in use.  Global Mobile Alert executives envision a variety of scenarios and applications of this patent - but – the fundamental functionality revolves around cellular communication and location technology.

Green Driver, on the other hand, taps into an Internet feed from local municipalities to access signal light timing data which can be fed to smartphones for the purpose of enabling more fuel efficient driving by letting drivers avoid red lights.  But the Green Driver approach can also alert users to red-light runners, as long as those drivers have the app downloaded to an operating phone. 

Meanwhile, the Federal Highway Administration (FHWA) in the U.S. is in the midst of a two-year project to reduce traffic delays by enabling communication between vehicles and traffic lights.  (BMW is a sponsor of the research along with two universities.)  The FHWA estimates that “poor traffic signal timing accounts for 10 percent of all traffic delays – about 300M vehicle-hours – on major roadways alone.”

The FHWA’s objective is to use probe data associated with the deployment of vehicle-to-infrastructure communication to achieve a transformational change in how traffic is controlled.  To quote the study abstract: 

“This part of the study looks at the development of algorithm sequences for a connected vehicle to inform only relevant traffic signals about the vehicle’s proximity, velocity and signal request.  Information is sent from a traffic signal to a cloud-based data center, and then communicated over a 3G/4G network to in-car applications.

“With this data, the car is able to display signal phase and timing (SPAT) information to a driver and, if required, adapt the cruise control in real-time, according to the vehicle trajectory, to get through a signal corridor without stopping.  The technology, called ‘smart cruising’ also allows a driver to choose between reduced travel time or increased fuel efficiency.  Using ‘motor stops automatically’ technology, the vehicle can drive while the engine is switched off, effectively sailing along a corridor.” 

The FHWA’s use of the 3G/4G cellular network for its study reflects the fact that the only intersections equipped, today, with DSRC transponders are associated with a handful of pilots, such as the UMTRI V2I pilot in Michigan.  Global Mobile Alert takes the map-as-a-sensor approach to alerting drivers to intersections, but has also provided for RF communication between the car and infrastructure to support intersection alerts to drivers via the smartphone.

Green Driver’s work in connecting with the IP-based SPAT information of local municipalities (the company is currently operating in Eugene and Portland, Oregon; across the entire state of Utah; in the Dallas suburb of Garland; and in San Jose), has revealed a significant degree of fragmentation in traffic light systems and infrastructure around the U.S.  Some cities are online and able to “play ball” with Green Driver – sharing their SPAT info.  Other cities are able to share, but decline to do so.  Still other cities simply do not have the capability due to the limitations of the back-end systems or the physical roadside infrastructure. 

All three approaches – each targeted at different problems – are built around existing wireless technology.  Both Global Mobile Alert and Green Driver are essentially using the map as a sensor.  Green Driver obtains the SPAT data via the Internet while GMA proposes the use of cellular communication from the traffic light to obtain the timing info.

The new leadership at NHTSA has an opportunity to prioritize the reduction of intersection crashes and fatalities around a market-based approach based on existing technology.  Smartphones, map data, the cellular network and Internet connectivity ought to be leveraged to put into the dashboards of drivers the traffic light location and phase status necessary to improve the efficient management of traffic, reduce congestion and polluting emissions, and prevent fatal accidents. 

The Insurance Institute for Highway Safety (IIHS) continues to advocate for the efficacy of red light cameras to reduce red-light running and related accidents citing its latest research on installations in Virginia.  Not only do the IIHS findings conflict with more rigorous studies conducted by traffic authorities and universities everywhere from California and New Mexico to Virginia and New Jersey, it is by now clear that red-light cameras are nothing more than a revenue producing distraction and an invasion of privacy.

Red-light cameras do not even put additional officers on the street better able to focus on more important law enforcement matters.  In most deployments, officers must review and approve the citations – shifting the burden rather than conserving resources. 

We, indeed, have the technology to save lives, reduce congestion and emissions, and enable the safe, smooth flow of traffic through intersections.  And the best news of all, we can achieve all these objectives with market-oriented implementations of existing technology. 

“Most maps, including Google Maps, have not yet mapped the area.” – The Huffingtonpost (Sept. 2012) describing the Angelika Film Center in the Mosaic District of Merrifield, Va.

Can automakers, dealers, Tier One suppliers, and automotive app developers afford to continue requiring customers to pay ($199!) for annual map updates? My latest navigation adventure highlights the fact that the time has arrived both for “free” lifetime map updates in the car and more creative means for delivering monthly, weekly, DAILY! map updates for on-board navigation systems.

The map in the car has become the spinal cord for safety, powertrain, security, infotainment, and navigation systems.  Nearly every advanced system in the car requires access to location information – preferably on-board.

Increasingly, the on-board map is becoming a shared resource both for advanced driver assist systems and contextually aware infotainment systems.  For both of these cases context is determined, in part, by location along with weather, traffic and driver status among other things.

But there is an even more urgent issue, that I will return to, and that is the danger inherent in a driver following navigation instructions with an out of date map.  Few things are more distracting or disturbing than being told to make turns onto roads that don’t exist to enter freeways that have been bypassed.

All of these elements were brought home to me this past weekend.

My wife and I were trying to get to the relatively new Angelika Film Center in the Mosaic District of Merrifield, Va. last Sunday.  It was our first trip to this theater, so I was confident that neither the address nor the name of the Theater would be available in the on-board navigation system in my 2013 BMW 3 Series.  (This assumption would later prove to be accurate.)

To get to the theater I used Fullpower’s MotionX GPS navigation app on my iPhone 4.  MotionX is one of the most popular navigation apps on the iPhone.  Unfortunately, on this occasion, it insisted on directing my wife and I to a destination five miles away from the theater’s actual location.  (UPDATE: This was due to the fact that the Nokia map data was missing the information for my destination, according to Philippe Kahn, CEO of Fullpower.)

My wife then proceeded to look up the theater in the on-board POIs, with no success.  We then obtained the address online and attempted to enter it directly into the navigation system – ignoring the fact that the system in the car will not accept addresses that are not yet in the system.  So, in this case, we entered the street number closest to the actual address of the film center.

Half an hour after the movie’s start time we arrived at the cinema.  We accepted our fate and settled into a round of shopping and dinner and went to the next show – making for a later evening than originally planned.  (At least the toney establishment had toasted caramel popcorn!)

It was a minor event at the close of an otherwise uneventful weekend, but it highlights a huge problem that remains unsolved – on-board map updates.  (Yes, there are a few ways this unfortunate incident might have been avoided such as: a) using the Sendtocar function, which for some reason has not been working for my car; b) use the on-board Google Local Search to obtain the address – just checked and this would have indeed worked; c) ring up the BMW Assist Concierge service and have them download the address; or d) try a different mobile navigation app.)

Anyone who has been through a similar experience will appreciate the minor nightmare of not being able to find a simple destination.  You can imagine my wife and I pulling over into parking lots and side streets to double-check the entry and the results and to try a different approach.  I shudder to think about the amount of eyes-off-road time that was required before we found a solution and reached our destination.

But my minor nightmare is a terrifying reality.  Not only is the out-of-date map situation a nuisance, it is a driving hazard and a customer satisfaction failure.  It is no surprise, then, that JD Power identifies navigation systems as a source of ongoing and mounting complaints for car owners.

While JD Power is focused primarily on the user interface, it is time for the industry to confront the fact that every car being sold is going out the door with an obsolete map.  An obsolete map on board is an invitation to catastrophe for the car dealer, the manufacturer and the customer.  Yet no one seems especially worried or concerned.

The problem is most obvious in emerging markets where new cities and roads are proliferating on an almost-daily basis highlighting the limitations of digitized map in the car.  It is no wonder that Strategy Analytics’ research with navigation users in China has found the typical driver using multiple navigation systems - phone, on-board and portable navigation device – to get from point A to point B.

The good news is that the leading map makers – TomTom and Nokia – have progressed their map-building processes to enable daily if not real-time map updates on a global scale.  Nokia has even taken steps to put more of its surveying vehicles on the road while also providing for crowdsourcing of map data, something TomTom initiated many years earlier.  The problem lies in delivering those updates to the on-board system.

Most consumers these days will use their mobile phones to navigate if a destination is in a new or unusual location.  I will not delve into the shortcomings of mobile phone navigation in a car, but suffice it to say it is popular based on the findings of multiple Strategy Analytics surveys.

Car makers Ford, GM and Toyota Motor Europe have tried with varying success to enable display in the car of smartphone-based navigation instructions.  Ford was first with this approach and has had the most success.

But smartphone-based navigation defeats the integration of the map – the application spinal cord of the car – into advanced safety, powertrain and infotainment systems.  While smartphones can, indeed, deliver a contextual experience to the driver, the on-board map is necessary to properly anticipate workload demands on the driver based on the integration of on-board sensors with map-based and other inputs.

So, smartphone integration, while attractive and a useful car-selling proposition falls short of a fully integrated experience.  But that doesn’t mean the smartphone can’t provide another means to solving this dilemma.

At the recent North American International Auto Show in Detroit, Johnson Controls showed a solution from NNG using the smartphone as a map updating tool.  While the details were not clear – including whether the entire map or just portions of the map will be updated or, indeed, what the cost will be – the concept is spectacular.

Any driver getting into a car ought to be able to update the on-board maps on demand as needed.  Given current connectivity options, the smartphone is the smartest and best solution to this problem.

The fact that Johnson Controls is the first to show this approach publicly reflects the power of a newcomer entering the market.  While NNG works closely with other Tier Ones, such as Harman, it is Johnson Controls that put the concept front and center in its booth in Detroit, although no press release was published.

Based on conversations with competing navigation software providers, the likelihood is that competing systems and solutions will soon be on display.  The bottom line is that, once again, the smartphone represents the solution to a hazardous driving condition, not the source.  At stake is the mitigation of driver distraction, enhancing the driving experience and assuring the highest level of customer satisfaction.