4G LTE and the future of the connected car, part I

Jan

Jan Stojaspal

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3rd December 2013

The coming of 4G LTE wireless networks marks a radical leap forward for in-car connectivity, one that, analysts and industry insiders agree, will bring benefits to both manufacturers and consumer.

The technology’s bandwidth and low latency are expected to enable high-definition audio and video streaming, allow real-time video diagnostics and provide more accurate real-time traffic information.

Passengers, for their turn, will benefit from being permanently connected to broadband Internet, and OEMs will have better access to their vehicles for over-the-air software updates.

“It will also make it possible for business users to have video conferencing in the backseat,” says Gareth Owen, principal analyst at ABI Research. “And it will bring Wi-Fi within the car, enabling three or four people to use their tablets or laptops. At present, the low bandwidth essentially limits this to one user.”

However, not everyone in the industry is filled with unqualified enthusiasm for the technology.

At Telematics Munich 2013, a Telematics Update conference held in mid-November, one panel discussion highlighted several obstacles to the technology’s rapid integration.

Pavan Mathew, global head of automotive telematics at Telefónica, pointed out that the driver’s main business remains driving, which limits the technology’s uses. “There’s very little left to interact with LTE,” he said. “We are not seeing the usage today.”

Low LTE usage will remain the case for the next two to five years, Mathew said, adding that LTE was “fantastic” for other use cases, such as family trips or multiple devices. “But it’s not going to pay the bills.”

There is also the problem of high roaming costs in Europe. Finally, there is the issue of gaps in coverage, both in Europe and the United States.

According to Phil Kendall, director of wireless operator strategies, Strategy Analytics, there will be an estimated 59% 4G network coverage in Western  Europe by the end of 2013. That is expected to rise to  90% by the end of 2015 and 95% two years after that. “What we’re seeing in Europe is LTE focusing on urban areas and lightly deployed elsewhere,” he said.

The same goes for the United States, where Verizon has taken the lead in deploying 4G LTE, according to Kendall. In June, the company said its 4G network was available in 500 markets, covering over 95% of the population but leaving large swaths of rural areas wanting.

As a result, people driving through low-coverage rural areas in both Western Europe and the United States will experience a substantial drop in performance that will affect apps and services requiring broadband connectivity, such as video streaming.

“If you’re Audi or BMW and putting a 4G module in your cars, it can’t be 4G only,” Kendall said. “It needs to be 4G and 3G.”

Still, reservations aside, most analysts and business insiders agree that 4G LTE is inevitable and potentially very beneficial.

(For our coverage of Telematics Munich 2013, see Telematics Munich 2013: Day One and Telematics Munich 2013: Day Two.)

New revenue streams for OEMs

Roger Lanctot, associate director, automotive multimedia & communications practice, Strategy Analytics, says that the essential aspect about 4G LTE is “it enhances the value of the car through added features and functions, or enhances features that were there and not paid for by the consumer when he bought the car.”

“This provides potentially lucrative aftermarket opportunities for OEMs,” he says.

Lanctot envisions “a four- to five-year trajectory to all cars having embedded connectivity with a standard offer and a premium offer on top.”  

OEMs also stand to benefit from the large amounts of data that will be harvested from the car with the technology, Owen says, adding that OEMs can monetize some of the data by selling it to third parties, for example, to companies interested in certain consumer trends as illustrated by in-car connected behavior.

In September, IBM and the German-based automotive supplier Continental announced a collaboration to develop a Cloud platform to enable OEMs to provide a range of services made possible by 4G LTE technology, such as remote software updates and vehicle control functions.

Robert Acker, vice president, connectivity, at infotainment and audio provider Harman, says that accessing large amounts of data from cars “is a whole new field” and could also open up new business models for car insurance.

“If I can prove to the insurance company that I’m a safer driver, this will lower my rates,” Acker says.

But the generation and sharing of so much data raises privacy issues that will have to be dealt with. “It all depends on how OEMs handle it,” Owen says.

Safety and security

Strategy Analytics’ Lanctot suggests that one service the technology will make possible is to enable “a visual connection to on-line operators, similar to Amazon’s Mayday service.”

Having access to a live operator from your vehicle is a potentially invaluable asset for car safety, he says. “The operator can see the state of your car, remotely take control of the automobile and tell you how to fix the problem. Eventually, the operator could take over and fix something or even drive it remotely, if necessary. Remote driving is just down the road.”

The live on-line operator could also intervene if there is a medical crisis of some kind, or the vehicle has been carjacked, according to Lanctot.

Owen also believes 4G LTE will be an important factor in car safety, potentially saving OEMs hundreds of millions of dollars in costly recalls.

“For example, the OEM could carry out software upgrades and monitor the cars,” he says. “They can collect data on how the car is being used and identify faults before they lead to damage or accidents. This could prevent recalls caused by faults that started three or four years earlier and simply went unnoticed.”

That is also the view of Christopher Ruff, president and CEO of Cloud-based software provider UIEvolution.

“The more software is connected to the car, the more we’ll know what the driver is doing,” he says. “This will make the car safer and easier to drive. The driver’s interaction with the software will make better cars, better apps and better drivers.”

It will make the car safer in other ways too, he says. “The biggest problem with safety in a car is mobile phones. I’m a proponent of people giving up mobile phones in the car, and, for that, you need better apps. With better connections, we’ll be able to update [in-car] software. It also allows us to build richer and smarter applications, and allows us to continuously improve these apps based on driver feedback.”

Return next week for part two of the series, which deals with 4G LTE and autonomous driving, and who will foot the bill of widespread adoption of 4G LTE by the connected car industry. 

Siegfried Mortkowitz is a regular contributor to TU.

For all the latest telematics trends, check out Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco, Consumer Telematics Show 2014 on Jan. 6 in Las Vegas, Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, and Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.