Fleet telematics and the 2G phaseout

Fleet telematics and the 2G phaseout

There’s no denying it. 2G is on its way out in the United States and elsewhere.

Whether in the next two or ten years, a fleet manager with a telematics solution using the second generation wireless technology will eventually have to upgrade.

But when does he best do it? It turns out there is no clear-cut answer.

Kathryn Weldon, Americas research director for Current Analysis, predicts fleet management solutions (FMS) will move to 3G and 4G sooner rather than later. “The 2G sunset creates the same issue for many M2M verticals,” she says. “The ecosystem will have to come to terms with it and go to 3G and eventually 4G for future apps.”

Others are not so sure.

For one thing, 2G will continue to be available in many parts of the world, though with less and less coverage as parts of the spectrum get repurposed for 3G and 4G. Also, there is a chance that a better and cheaper connectivity solution might become available.

For instance, new standards being developed now may enable M2M communications to take place over underutilized TV spectrum. And costs associated with satellite networks are expected to drop to make two-way satellite a viable alternative.

(For the latest on satellite, see Fleet telematics and satellite communications.)

Market confusion reigns

One reason why U.S. fleet managers have not jumped to faster networks already is that hardware prices for newer generation chipsets and modules are still relatively high, although coming down.

Coverage also remains an issue. Although network technology continues to advance at a rapid rate, no one can say when 3G and 4G networks will reliably cover rural areas.

Also, those with more than a few years’ experience working with cellular technologies have learned not to rush things.

Chuck Link, chief technology officer for Verizon Telematics, offers the following example. The first 2G modules he and his brother Kevin Link, now a senior vice president at Verizon Telematics, used were more than $260 apiece. Later, that same unit cost less than $100. The price is now about $25.

Another thing analysts and product developers continue to debate is when carriers will actually end support for 2G. In the United States, AT&T plans to discontinue 2G on Dec. 31, 2016, with other top network providers saying they will keep 2G alive until 2020, give or take a year.

(For more on this, see Weekly Brief: Kissing 2G goodbye.)

Keeping 2G alive, for now

Some argue that keeping the expenses low for a fleet telematics solution is essential to establishing a solid return on investment (ROI). Others place greater weight on network availability. For now, both factors favor 2G.

“Having a ubiquitous network is the most important precondition for almost anybody building services and applications in this market,” says Alex Brisbourne, president of Kore Telematics.

What's more, even though 3G and 4G coverage continues to expand to more remote areas, it’s unlikely it will ever reach all the places that off-road industrial or heavy equipment operators need covered.

And it is here where alternatives to cellular could make for a more compelling ROI.

A new radio wireless standard is being developed by a group called Weightless, a play on the fact it would enable using license-free TV spectrum for M2M communications. Others, like On-Ramp and Sigfox, are building networks using the ISM band or UNB to provide low-cost connectivity.

Worldwide coverage through satellite is also expected to be available at greatly reduced costs in the next two to five years. 

According to Dominique Bonte, a group director at ABI Research, satellite makes most sense for maritime fleet solutions. (He is unconvinced it will gain much traction in ground-based commercial vehicles.)

Still, firms like Inmarsat, SiriusXM, Iridium and O3B Networks are betting on a major comeback of two-way communication via orbital relays, particularly when it comes to high-value, track-and-trace systems on things like containers crossing national borders.

The sunset conundrum goes global

AT&T made public its plans to turn off its 2G network in a recent SEC filing. With it came a new storm of speculation about which carrier might be next, and how this would affect remaining 2G subscribers.

But, really, this most recent headline-grabber is simply the latest affirmation that older-generation networks are going away.

Even with no such deadline declared, European operators now face a similar challenge. “If you think AT&T are the only bad boys, I beg to differ,” Brisbourne says. “We’re seeing the other GSM carriers re-farming spectrum.”

Still, many of Kore’s U.S.-based customers are choosing to invest in older-generation telematics modules because the costs are so low now – modules cost about half as much as 3G components. And further savings come from the fact that the recurring network costs are lower.

Waiting out service chain instability

Even so, the ROI story for 3G or 4G fleet telematics need not look bad either. “It’s technically possible today to build a fleet telematics device for which the cost recovery takes less than three months, even with 3G and LTE technologies,” Chuck Link says.

Gains from fuel efficiencies or route optimizations will quickly outweigh costs of maintaining older trucks and vans. Kevin Link explains this further: “The business case for the connected fleet is pretty straightforward. The key elements are idling vehicles and inefficient logistics. Fixing one of those can have a dramatic payback to a fleet manager.”

For those with aging fleets, the decision to move to 3G or 4G is far less difficult. Their new trucks will likely already incorporate advanced connectivity.

As for the rest? David Wigglesworth, vice president of M2M Data Services at Iridium, sums it up as follows: “I think it will take a while before fleet managers suddenly say to themselves: ‘This has reached critical mass. We need to go out and replace all the units.’ Because that’s a huge cost.” 

Jenny Neill is a regular contributor to TU.

For all the latest telematics trends, check out Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco, Consumer Telematics Show 2014 on Jan. 6, 2014, in Las Vegas.

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


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