Telematics and “Connected Vehicles”

1. Telematics and “Connected Vehicles” Mike Peterson (LFM ’94) Strategy Planning Manager OnStar michael.l.peterson@onstar.com

2. Telematics and Connected Vehicles • Definition of Telematics • Drivers • Infrastructure • Current & Future Offerings • Challenges & Opportunities Telematics – 040109 LFM webcast.ppt

3. Definition of Telematics and “Connected Vehicle” • A two-way connection to and from a vehicle for data and information transfer • Telematics is typically not: • Onboard autonomous navigation systems • AM/FM radio • A telematics system consists of: • Vehicle (cell phone, GPS, vehicle data) • Wireless interface • Back-office systems Telematics – 040109 LFM webcast.ppt

4. Potential Components of a Telematics System Point – to – Multi-Point CELLULAR WIRELESS CONNECTIVITY WIRELESS INTERFACE Satellite / Microwave Fiber / Cable ENABLED VEHICLE CELL TOWERS Call Center Application Management BACK-OFFICE SYSTEMS Content Providers Source: Erik Bue Telematics – 040109 LFM webcast.ppt

5. Markets for Telematics • Vehicle types • Personal vehicles: cars, trucks • Boats, motorcycles • Work vehicles: mail trucks, semis, Border Patrol, Coast Guard, ambulances • Vehicle owners • Personal • Fleets • Military Telematics – 040109 LFM webcast.ppt

6. Value Propositions for Telematics • To consumers • Safety & security • Time savings (navigation) • Increased productivity (in vehicle) • To fleet provider • Optimization of assets (asset tracking, performance monitoring) • To business • Additional data from vehicles (warranty, usage) • Increased vehicle sales (or “price of survival”) • To government • Improved infrastructure management (traffic, tolls) Telematics – 040109 LFM webcast.ppt

7. There is a significant market opportunity for telematics, if done right. • Wireless use is growing • US wireless industry is $80B (WSJ 7/28/03) • 30 M US households will employ data networks by end of 2007 (Park Associates) • Intel’s Otellini predicts that 1.5 B PC’s will have wired or wireless broadband connections by 2010 • Cable broadband services posting operating profits of ~60% (CIBC) • Consumers want to be more productive • Consumers pay $15-100/mth for cell phones & internet service providers • Average US citizen spends 541 hrs/yr driving in vehicles (1.5 hrs/day) (NTPS) • 97 M people in the US spend at least 37 minutes commuting in their car every day. • Automotive industry is highly competitive; features and services which provide a lead are crucial to success Source: Erik Bue Telematics – 040109 LFM webcast.ppt

8. Predictions: Telematics-Enabled Auto Sales 12 10 8 USA 6 W. Europe Japan 4 2 0 2002 2004 2007 2010 Telematics – 040109 LFM webcast.ppt

9. Prediction: Telematics-Enabled Autos In-Use 45 40 35 30 25 USA W. Europe 20 Japan 15 10 5 0 2002 2004 2007 2010 Telematics – 040109 LFM webcast.ppt

10. Current Telematics Services - Consumers • Safety • Air Bag Deployment Notification • Seat Belt Tension Notification • Emergency Assistance • Roadside Assistance • Security • Automatic Theft Notification • Theft Tracking • GeoFencing • Vehicle Status • Remote Diagnostics • Remote Vehicle Operation • Remote Unlock • Remote Horn/Lights • Information Services • Navigation Assistance • Points-of-Interest • Vehicle User Info • Convenience Services • Internet Based Services Telematics – 040109 LFM webcast.ppt

11. Additional Telematics Services - Fleets • Fleet Performance • Maintenance Management • Fleet Tracking • Asset Management • Vehicle Information • Usage Monitoring • Vehicle Tracking • Fleet Utilization • Customer Processing • Paperless Manifest • User log book • Instant Messaging • Job Dispatching Telematics – 040109 LFM webcast.ppt

12. Examples: OEM telematics offerings • Mercedes (Tele Aid): $240/yr + airtime to call center $75/yr route support/traffic package $1300 optional integrated phone $400 voice recognition option for phone • Jaguar (JaguarNet): $2250 + airtime • Includes portable phone and voice-activated controls • BMW (Assist): $120/yr $1290 phone req’d for telematics $1800 navigation system req’d for telematics • Volvo (On Call Plus): $240/yr • Does not offer route support or remote diagnostics • OnStar: $200/yr for safety & security services (airtime included) $400/yr to include information & navigation services Telematics – 040109 LFM webcast.ppt

13. OEM Telematics Players – Offerings over Time (North America) 1996 1997 1998 1999 2000 2001 2002 2003 CY Telematics – 040109 LFM webcast.ppt

14. Many opportunities exist in the future to enhance current services and create new ones. • Data services • Software downloads • Content downloads • Enhanced vehicle diagnosis & repair • Expansion into other dimensions of vehicle lifecycle (manufacturing, vehicle development, design) • Key enablers for future services/growth • Communications bandwidth • Coverage (wireless) • Vehicle penetration • Vehicle integration (messaging) • Reduced costs (hardware, service) • Standards (Bluetooth, vehicle messaging) Telematics – 040109 LFM webcast.ppt

15. There are many “pieces of the puzzle” which create value in telematics. • Marketing of services (education of consumers) • Integration of services (menu structures) • Integration of equipment into vehicle (human/machine interface) • Connection of vehicles to content (wireless) • Conversion of data into services (back office) • Content providers (vehicle data, entertainment) Telematics – 040109 LFM webcast.ppt

16. Competition among service providers is seldom one-to-one; each player has a slightly different offering. • OEM-owned telematics service providers (OnStar) • Aftermarket devices (LoJack, NetworkCar, Mobile Guardian) • Independent telematics providers – retail (ATX, Cross Country) • Independent telematics providers – fleet (Qualcomm OmniTRACS, @Road) • Voice portals (TellMe, BeVocal, Internet Speech, AOL By Phone) • Cell phone voice services (Verizon, Sprint) • Auto club services (AAA) Telematics – 040109 LFM webcast.ppt

17. In addition, each piece of the telematics value chain has its own set of players. • Content • TeleAtlas, NavTech, MetroNetworks • CNN, Disney, ESPN • Operating systems (Microsoft, Java, Linux) • Vehicle hardware (Delphi, Nokia, Samsung) • Voice recognition (Nuance, Speechworks, IBM) • Call centers (EDS, GE, Cross Country) • Business Operations (Digitas, Acxiom, Sigma) Issues in partner selection: • Volume capability • Support capability (established firm?) • Exclusivity • Flexibility Telematics – 040109 LFM webcast.ppt

18. Finally, there are a variety of wireless technologies that can be applied to telematics. • Cell (Analog, CDMA, GSM; voice, data/SMS) • Short-range communications (Bluetooth) • Medium-range communications (802.11) • Satellite communications (Boeing Thuraya, XM Radio, Sirius) Issues in technology selection: • Level of ubiquity • Reliability of technology • Upgradability • Level of control over provider (multiple sourcing) Telematics – 040109 LFM webcast.ppt

19. Challenges – Hardware/Technology • “Clockspeed” mismatch • Telematics services (1-6 months) • Consumer electronics (6-18 months) • Vehicle development process (3-5 years) • Vehicle ownership lifecycle (6-15 years) • Shifts in technology (analog  digital) • Technology application (client vs. server) Challenges – Societal • Government regulation (FCC – E911) • Interface with emergency service providers Telematics – 040109 LFM webcast.ppt

20. Challenges – Strategic/Financial • High cost of infrastructure • Investment = control • Involvement of multiple partners • Packaging of services • Wide variety of customer needs/wants • Consumer confusion • Selection of business model • Upfront equipment sales • Service subscription • Grow critical market mass • Operating efficiencies • Licensing/royalties Telematics – 040109 LFM webcast.ppt

21. Examples of Business Models “In Play” • i-Mode DoCoMo: Define platform for 3rd party software development: monthly revenue from: basic service, data traffic and fee from 3rd party service providers • Microsoft: Create the OS for vehicles that becomes the standard that all future consumer telematics applications must be built off of • OnStar: Seed network through factory-installation onboard vehicles purchases • Cell Co’s: Compete based on lowest price to service quality ratio • TiVo: Charge monthly service fee upfront at a discount • Palm/PDA: Define & market hardware & OS; nurture application developers. Make alliances with Cell Co’s. • Dell: Least expensive, custom-assembled modular systems based on commodity components • Leverage COTS Components: eg Apple iPod: Over 1M people have been willing to pay $300-500 for the 5-40GB drives. Source: Erik Bue Telematics – 040109 LFM webcast.ppt

22. Parting Thoughts • Telematics represents a significant but complicated opportunity. • There are many ways to create value in telematics, many of which have yet to be fully exploited. • The telematics “industry” is a network of partners across a variety of disciplines. • The “winners” in telematics, as well as the ultimate potential of the industry, is yet to be determined. Telematics – 040109 LFM webcast.ppt

23. Open Questions (for discussion) • How does/could your business participate in this space? • What needs to happen to unlock the full potential of telematics? • What service domains will be most important in the future? • What business model(s) do you think will be most successful? Telematics – 040109 LFM webcast.ppt

24. Appendix – OnStar Overview

25. OnStar’s Beginnings 19962002-3 Employees 18 436 Subscribers 1 2M+ Hardware Phone 5th Generation Services 8 15 Database 600K 7M Advisor Seats 6 1,000+ Distribution 1,500 Dealers Factory Brand Recognition 1% 90% Telematics – 040109 LFM webcast.ppt

26. Portfolio of Core OnStar Services • Directions & • Connections • All Safe & Sound services plus: • Route Support/Directions • Information/ Convenience Services • RideAssist • Safe & Sound • Automatic Notification of Air Bag Deployment • Emergency Services • Roadside Assistance • Stolen Vehicle Location • AccidentAssist • Remote Door Unlock • Remote Diagnostics • Online Concierge • Luxury & Leisure • All Directions & Connections services plus: • Personal Concierge • OnStar MED-NET Telematics – 040109 LFM webcast.ppt

27. OnStar Personal Calling • Embedded in vehicle • Hands-free, voice-activated interface • Pre-paid minutes • No roaming, no long distance charges • Nationwide wireless network coverage Telematics – 040109 LFM webcast.ppt

28. OnStar Virtual Advisor Stock Quotes Fidelity Investments News Wall Street Journal ABCNEWS.com CNNRadio Entertainment Disney.com E-mail Sports Scores/News The Sporting News Radio ESPN.com Weather Weather.com Traffic Metro Networks/Tele Atlas Personalized web-based information delivered to the vehicle using hands-free, voice-activated interface Telematics – 040109 LFM webcast.ppt

29. Telematics – 040109 LFM webcast.ppt

30. XM Satellite Radio XM Satellites • Two Geo-stationary satellites • 1,700 terrestrial repeaters • In-vehicle equipment • Receiver • Antenna • Radio head unit Rock Roll Terrestrial Repeaters Telematics – 040109 LFM webcast.ppt