Verizon in hot pursuit of elusive telematics opportunity

editor's corner

Telematics systems can generate vast quantities of data, but the problem is no one has has any clue how to aggregate and use all of it to produce a seriously profitable product for the consumer marketplace. Verizon (NYSE:VZ) is hoping to change that, but its ambitious initiative has a long way to go.

Verizon announced creation of the 4G Venture Forum for Connected Cars, which links the telco with BMW, Honda, Hyundai, Kia and Toyota in a bid to use LTE as a connectivity mechanism for vehicles of all types. The group promises to leverage open standards and work with automotive OEMs, suppliers, device manufacturers, application developers and content publishers to further the telematics business.

The 4G Venture Forum for Connected Cars is a follow-on effort to the 4G Venture Forum, which was created in 2009 to develop ideas for innovative products and services that could ride on advanced wireless networks.

Verizon looks serious about the telematics opportunity. Verizon Communications just agreed to acquire Hughes Telematics for $612 million, while Verizon Wireless is working to integrate its LTE network with General Motors' OnStar service and is already delivering LTE connectivity for Cadillac's CUE system. Intriguingly, however, GM, Ford and Chrysler are all so far missing from Verizon's 4G Venture Forum for Connected Cars.

That may be because intent is one thing; profit is another. There are plenty of ideas for enabling vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2X) communications, but just because one can send terabits of data zapping around between trucks, cars, motorcycles, scooters, toll booths, traffic information systems and more doesn't mean that the data will be put to sufficiently good use to justify the expense of setting up the telematics systems or that anyone will profit from the efforts.

There are some early moneymakers on the consumer telematics front, namely the auto insurance companies that have been among the first to employ telematics in their business. Generally, the companies offer discounted premiums in exchange for being allowed to track an individual's driving habits. Just this week, Ford and State Farm insurance announced a program that allows State Farm customers with select Sync-equipped Ford vehicles to reduce their premiums if they report their mileage using the Vehicle Health Report feature. The program ostensibly could save drivers who don't rack up miles on their vehicles some 40 percent a year on insurance. State Farm's Drive Safe & Save program for Ford Sync is being introduced first in Utah.

But don't kid yourself that altruism is the foundation for these types of insurance programs. A report from Towers Watson revealed that 73 percent of insurance carriers using telematics said the technology bolsters profitability.

Infotainment is another area that might be monetized via a well-engineered telematics platform, though that concept has not progressed too far. It could be that piping movies and videoconferencing into a moving vehicle is an iffy, not to mention expensive, proposition.

The main takeway from Verizon's connected car efforts at this point is that there is huge interest in this area, which is likely to produce some winners and losers in terms of enterprise and consumer services.

While some consumer advocates have raised questions about the ownership of telematics data and expressed concerns about how this data might be used, there's really no escaping the fact that telematics represents the tides of change for the car-driving future. But whether that future will bring a manageable wave or a chaotic tsunami of vehicle-related data is still being worked out.--Tammy