5 ways mobile operators can tap into the connected car market

Senior Analyst - Enterprise cloud services and IoT/M2M, Pyramid Research

The smart car segment is one of the most dynamic and fastest-growing segments within the cellular Internet of Things/machine-to-machine (IoT/M2M) market. Automobile manufacturers, mobile operators and technology vendors are all trying to position themselves to become the leading interface with clients and thus maximize their share of the smart car opportunity. I believe that mobile operators have an important part to play in the value chain.

Global smart car subscriptions will see their share of the total cellular IoT/M2M opportunity increase from 18.5 percent in 2014 to 22 percent in 2018, according to Pyramid Research’s article “Mobile Operators Go After the Connected Car Opportunity—Cellular Telematics Value Chain, Business Models and Market Forecast.” In light of this predicted growth, I believe that mobile operators have an important role. Accordingly, the following are five specific suggestions for mobile operators to optimize their performance in the connected car market:

1. Create value through an adequate business model

Among the three smart car business models (embedded services model, aftermarket model and tethered model), the embedded services model, driven primarily by car manufacturers, is the most popular—or at least the most advertised. Under this model, the mobile network operators (MNOs) have a limited role, providing mainly connectivity for an end-to-end solution provided by the car manufacturer. Alternatively, the aftermarket and tethered services models, via data services subscriptions, feature smart car devices and applications either embedded in a vehicle at the time of its manufacture or installed as an aftermarket product, creating opportunities for MNOs at different levels of the value chain. All three models represent opportunities for mobile network operators (MNOs), but ultimately each MNO must adopt a business model meeting the needs and requirements of its customer base.

2. Pursue the best technological fit

MNOs must look for a technological partner that will allow them to manage and control all the different elements of the value chain, including connectivity, roaming management, uptime, application development, integration, data collection and storage, and big data analytics from multiple smart car applications. Operators can choose a hosted solution or a cloud-based solution. I believe that cloud-based solutions give operators the ability to more quickly scale, can accelerate the smart car services time to market and, most important, reduce capital outlays.

3. Evaluate cellular network upgrades based on their ability to support a variety of car applications

The connected car segment covers a full spectrum of applications ranging from security services—for example, stolen vehicle recovery services—to infotainment applications such as video streaming. These applications require different levels of data speeds, throughput, reliability and availability, so their performance depends on the type of network (3G, LTE) to which applications are connected. As MNOs plan how to evolve their mobile networks, they will need to align themselves to those applications that are seeing greater demand and that are in alignment with the evolution of the network.

4. Emphasize safety

The entire industry seems to agree that managing multiple nonintegrated applications while driving represents the most important concern. MNOs can put safety first by expanding and integrating vehicle-to-vehicle (V2V) communications services not only with the vehicle, but also with other application services such as navigation aids, road assistance and emergency services.

5. Protect privacy

In a recent panel I moderated at IoT World in San Francisco, the experts exposed some risks around data privacy protection within the context of the smart car. General consensus said that a driver’s use of in-vehicle technologies and services constituted legal consent to the associated data privacy service provider’s practices. But does the simple fact of driving a car allow the service provider to use my personal data for marketing purposes? One of the panelists, Elliot Katz, an associate at DLA Piper, opined that service providers must obtain affirmative consent from a driver when using geolocation information, biometrics or driver behavior data as bases for marketing or when sharing such data with third parties. Accordingly, operators should adopt a proactive approach to managing liability for data privacy.

Clearly, the connected car brings business challenges and opportunities. Ensuring a long-term, holistic strategy will be key to tapping into a connected car market with opportunities that we’re only beginning to imagine. It is high time that mobile network operators assess the smart car market opportunity by taking steps to develop a long-term strategy. Indeed, time is of the essence, and developing strategic alliances with technology vendors who are offering cloud-based platforms is critical step for accelerating time to market and effectively competing in this space to increase revenue opportunities from the customer base.