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Telematics free-fall? 21/05/2003
What is happening to the telematics market? Where has all the promise of a telematics-driven future gone? Has the industry as a whole fallen victim to its own marketing hype? Or is the answer more complicated than that? There are, of course, exceptions but the picture seems a long way from the that which seemed possible just a few short months ago. Certainly the telematics in the broadest sense of the word has not taken off in the way that many had envisaged. There is a sense that the public are not yet ready to accept some of the current offerings, particularly where these are seen as peripheral to the central task of driving and safety.

Into this category have fallen route guidance and navigation products that have failed to catch the public's imagination to the extent that sales staff would have us believe. So what has gone wrong for this sector of the market? And are there lessons to be learned for the future?

It is tempting to believe that the industry is driven more by hope than any real understanding of the requirements of the end user in launching products onto a sceptical market, although that would be manifestly unfair. Five years ago, the mobile communications industry faced the same dilemma over the question of when to launch text messaging and, later, over wireless application protocol (WAP).

For them, as for the telematics industry now, the question centred on the readiness of the public to accept the new technology and in reaching their decisions, heavy reliance was placed on the results of market surveys. The problem, as many in the communications and telematics industries have learned to their cost, is that the public does not know what it wants until it sees it.

As a result, this has been a hugely uncomfortable, not to say disappointing two years for those who had hoped for widespread acceptance of all that modern technology could offer. Some of the best known names in the navigation/route guidance sector have failed to make a profit in what has become a crowded marketplace and others have felt obliged to withdraw from international markets.

Most recent of those to feel the cold draught of economic reality has been the UK based company Trafficmaster who, in April, announced a withdrawal from continental Europe, less than 7 months after announcing a tie-up with Motorola for its Smartnav service in Germany. The news follows hard on the heels of heavy losses reported by Tele Atlas in the United States and the provision of stand-by funds from its two main investors, Bosch and IAM in the spring of this year. In Germany, T-Mobile recently took over control of the troubled Tegaron Telematics which, with Vodafone Passo, had found it difficult to find paying customers for their services. At the end of 2002, Ford took the decision to switch its marketing effort away from the retail consumer and to concentrate instead on the fleet customer in recognition of the better returns available in that sector of the market.

"The European market for traffic flow data has simply not developed in the way that most pundits forecast," said David Martell, Trafficmaster's Chief Executive in response to a direct question. "Our technology works well but we are not proposing to invest further in European traffic operations until there are signs of a marketplace developing. We maintain our dominant position in the UK."

As with the European scene, so with the North American one. Not only is Tele Atlas failing to show a profit but so too is Trafficmaster's American subsidiary, Teletrac and the San Jose, California based Telcontar. The reasons are extremely complex but some indication of the root cause may lie in the results of a study published in January this year entitled 'Telematics in Cars: Survey of Customer Perceptions and Attitudes'.

A high percentage of European drivers questioned for the study, claimed to place a high value on 'the perfect telematics system' which would include navigation and route guidance advice. At the same time, many admitted to a lack of knowledge on what was possible in telematic terms. Quite how these apparently conflicting positions were reconciled, was not made clear but it does indicate the difficulties faced by companies attempting to define their development strategy.

There is no question but that the provision of traffic services have moved on apace over the last 2 or 3 years with tie-ups between navigation and route guidance service providers helping to offer the best of both worlds. The advent, too, of off-board services have ensured that maps are a little less out of date than is the case with CD-ROM versions. But this progress has not yet produced the killer-application perhaps because of a fear of the hidden connection costs implicit in off-board systems.

"Mobile telephone charges terrify employers," said one insider. The situation in this regard is now better than it was before the arrival of the GPRS (General Packet Radio Services) protocol but the perception of cost still lingers. "Drivers want an all-inclusive price for services, not contracts."

All this is not to say that navigation and route guidance are dead letters in the telematics lexicon. Some, including ITIS (Integrated Transport Information Services) and Yeoman in the UK and Navigation Technologies in the US are doing well.

"We are enjoying double-digit growth year on year," said Andrew Little, marketing director with Navigation Technologies. "What we are seeing is that vehicle manufacturers are making navigation technology available as an option much deeper through their range of vehicles."

What is not entirely clear is the level of satisfaction felt by drivers who have exercised the option to purchase a navigation system in vehicles like the BMW 3 series, the Renault Laguna, the Fiat Punto, the Ford Mondeo and the Toyota Yarris. The Frost & Sullivan study quoted above shows a range of awareness of telematics products that range from 70% in Italy to just 4% in the UK but did not specifically target existing users.

Toyota, at least, has no illusions about the lack of profitability in the provision of traffic services. At a meeting of the TMC (Traffic Message Channel) Forum in December 2002, Mike Hutchinson, manager of product integration at Toyota (GB), said, "We found our customers had a low estimate of the value of the (navigation) system and a low level of usage we do not view telematics as a source of revenue."

It is this lack of perceived customer satisfaction in the level of service that is now being tackled in Germany as part of the Traffic Equaliser project that will see vehicles receiving data through the DAB (Digital Audio Broadcasting) wireless protocol on traffic incidents, weather and environmental factors. Ford, who are heavily involved in the research project expect the resulting dynamic navigation system to reduce congestion and thus reduce noise and pollution. Given the company's view on retail sales of its telematics products and the collapse of Wingcast in June 2002, it would be premature to judge the project's outcome. Perhaps of greater benefit would be an agreement on a global or even a regional standard for in-vehicle telematic applications.

In this regard there are several pressure groups, each pushing their own solution, including ITS Ertico's GTP (Global Telematics Protocol) which was launched at the beginning of April claiming bearer independence and multi-vendor support. Co-ordination with the various standards bodies is already under way. Whether this or some other standard is ultimately successful, what is apparent is that if the difficulties currently being faced in reaching agreement on the DSRC standards are to be avoided, it will need to be reached sooner rather than later. Without a standard, progress towards a more user-friendly traffic services will be that much sloer and more expensive for all concerned.

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