There are all kinds of reasons why mobile carriers are becoming obsessed with machine-to-machine connectivity, and many of those are shorter term than the vista of the internet of things, with its 50bn devices, over the horizon. The main interest is that M2M, as some of its applications start to require full broadband data, can give the cellcos’ walled gardens one last hurrah. Locking in a large enterprise or utility customer is far easier than keeping a modern consumer faithful, and the best area of all to close the garden gates and achieve predictable revenue streams is the connected car.
Technology within cars has been evolving for years, from the original carphone to the seatback video screen to the personal navigation system. As in the living room, most of those functions will be increasingly controlled by the smartphone, and in-car screens and dashboards will reflect the same content, apps and user interface as the handset or home TV.
There has been a lot of work done on car-to-car connectivity in recent years, but currently, the focus is firmly on connecting the car to the cloud, and the ecosystem is starting to mature. Broadcom and Qualcomm are extending their connectivity chipsets from handsets to automobiles (and the latter is even pushing its wireless charging technology into electric vehicles, making the prospect of a Snapdragon car quite possible). They join the traditional auto chip providers, such as Freescale, in the race to bring internet access and intelligence to the driver, while there is a similar battle among platform providers.
Apple and Google are using specific car-relevant services, such as the former’s Siri, as Trojan horses to build the whole auto experience around their mobile OSs. But this is an area where Nokia has real, and rare, competitive advantage, and with its Here cloud-based location offering now divorced from Windows Phone (even more finally after the Microsoft deal completes), the Finnish firm should act aggressively to create an entire in-car platform before iOS and Android take too much hold. This could still integrate with third party smartphones but Nokia has a real chance to become the dominant back end and service engine.
The cellcos have even more at stake here. Their control over the customer bases has been eroded by non-contract data plans, mobile number portability, open access and rising consumer awareness of the benefits of shopping around between operators. But as the first LTE cars come to market, some will be tied to a specific carrier, chosen by the auto firm, not the end user. Like utilities, and other groups which are embedding cellular connectivity into the devices they sell to their end customers, they will sign deals with a single provider ‘ deals which may come up for review every few years, but will have none of the unpredictability of consumers (which is extending to the business space thanks to BYOD).
This is the dream outcome for the operators, and they are battling hard to make it a reality. They have succeeded in the US, where the first 4G cars, such as the Audi A3, do not have LTE capacity included in the price, Kindle-style, as some had anticipated. They will carry a data plan like any other mobile device, but the user will not be able to choose which one.
In Europe, the situation is looking less favorable to cellcos, since the LTE-enabled Audi S3 has appeared with a SIM card slot in the dashboard, so that the user can insert any carrier’s SIM. In addition, it has a Gemalto M2M module supporting many of the European spectrum bands. This reflects the long-standing difference between the European and US approaches to frequency and operator flexibility, via the almighty SIM card.
But it also reflects an ongoing debate in the nascent broadband M2M space, in terms of which member of the value chain should control the connection ‘ the service provider, such as a utility or car maker; the end user; the operator; or a separate integrator. Like the battle to control mobile payments, it is vital to the cellcos that their technologies remain the key points of control ‘ and in contrast to m-payments, where SIM-based NFC is losing ground, that victory is close in the cars.
However, the SIM card is a double-edged sword. It keeps the carriers in the driving seat, but it also makes it hard for one single carrier to lock down users as the US operators are being allowed to do by the car sector (AT&T, for instance, will power in-car connectivity for all GM cars sold in the US, including the OnStar telematics and navigation system). European counterparts will still have to fight for customers (though they will be able to get valuable behind-the-scenes contracts with carmakers for systems such as roadside assistance control). And in time, the SIM card could become an enemy in the M2M space.
For smaller and simpler M2M and consumer appliances, SIM cards will have to be embedded, non-removable and automatically activated. Nothing else is practical, but it does move the all-important SIM from the complete control of the operator, and into that of the device maker. If the trend spreads to conventional mobile products, particularly handsets ‘ as Apple controversially explored for iPhone, a fight it signally lost to the European cellc os’ there could be another nail in the coffin of operators’ traditional models. They could cede activation rights to the vendor, losing another element of their direct relationship with the mobile user, as well as the chance to build value added services, such as NFC, straight onto the SIM. That is already happening in m-payments, and for all the happy signs for US cellcos in cars, it is likely to happen to their European peers in the auto and other consumer-facing M2M segments.