Mobile connection systems integrated into automobiles look set to provide a new source of revenue for telecoms operators, who are already working with vehicle manufacturers to provide an efficient service to the end-user.

Connected cars a promising revenue opportunity for Telcos

Having an Internet connection available in your car is a growing trend. Already a number of partnerships  have been forged between automobile manufacturers and leading players from the ICT industry. Lately Google has been refining its smart car system and has also been further testing its self-driving car in town centre traffic conditions. This trend looks set to continue. The number of connected cars on the roads worldwide is forecast to reach 420 million by 2018, with global connectivity revenue from the vehicles exceeding €8 billion. An ecosystem is clearly growing up around the connected car, encouraging collaboration between auto-makers, telecoms operators and app developers. A recent report drawn up by the Connected Economy tracking group at European think tank IDATE analyses the strategies adopted by connected car manufacturers, who are thus likely to provide a new area for telecoms operators to achieve significant growth in the coming years.

Ecosystem still taking shape

By definition the ‘smart car’ implies connectivity to the Internet supplied by telecoms operators, who at the moment are struggling with flat revenues while also facing competition from new OTT players. Telecoms operators will be called upon to equip automobiles with connectivity, a potential source of new revenue streams. “We’re reaching out to hyper-connected people who are used to getting things for free and seeing non-stop improvements in the capacity of the information systems they have to hand. There must be additional revenue out there somewhere, but the form it will take will depend on both ingenuity and cooperation between auto manufacturers and network operators,” underlines Guillaume Crunelle, partner in charge of the automobile industry at consultants Deloitte. He is confident that telecoms operators will come up with new types of services, though there are still question marks over exactly how the new ecosystem will look and how revenue will be generated.

Convincing the consumer

“The strategy of most manufacturers is now to make their cars connected,” points out Samuel Ropert, Project Leader on the IDATE report. There are in fact currently three main technical solutions for equipping cars with a smart, Internet-connected system: an embedded module system (installed in the car itself); an online connection to the car via your smartphone; or a hybrid system which combines the first two, using embedded systems for telemetry and the smartphone link for entertainment. However, “the younger generation clearly expect to have connectivity services available in their car, whether for security, comfort or entertainment, but they’re not necessarily happy to have to pay an additional subscription or extra markup to a manufacturer or network operator,” warns Guillaume Crunelle. And while IDATE forecasts a steadily growing number of connected cars on the roads over the next five years, the parties involved will clearly have to create new business models in order to win over consumers who are not yet ready to pay more for these services.

By Eliane HONG