How car OEMs can mitigate connectivity risks

OEMs wanting to control their brand image and their destiny in a world of connected cars are having to look beyond the services provided by traditional mobile operators or telcos.

by Nick Palmen
No global telcos have the same market penetration as the major car OEMs, and telcos’ business models are, generally, not geared to supporting connected services. Predictions show, however, that connected services will be providing a significant stream of income for car OEMs in the future.

Automotive Industries (AI) asked Jacques Bonifay, Transatel CEO & President of MVNO Europe, to tell us more about this trend.

Bonifay: The trend in global cellular connectivity is clearly the development of the IoT (Internet of things). For Transatel, “the IoT” means a variety of verticals. We’re active in three market segments – consumer devices (connected laptops and tablets); automotive – we’re speaking of connected cars and trucks; and industrial machine-to-machine (M2M) IoT. Cellular connectivity can be implemented for a tracker, or sensor, a laptop, a car, or a plane, as in the case of Airbus, etc.

In terms of cellular connectivity, we have a 10% share of the mobile virtual network operator (MVNO) market in Europe. Both mobile operators and MVNOs hope to become players in the IoT segment. So, we’re observing the emergence of a new type of MVNO, which I call an “IoT MVNO”. Transatel remains part of the original MVNO sector because that’s still our core business, but
we’re also investing heavily in the new IoT MVNO business.

AI: What are the biggest challenges in creating global, multi-local data connectivity solutions?

Bonifay: The real challenge for anyone, whether we’re talking about an MVNO like Transatel or about telecom companies like
Vodafone, Orange or Deutsche Telekom, is to benefit from coverage everywhere in the world at a good price. You’re connecting devices which are made to be distributed globally, which means you need connectivity services that are not country or region-specific.

As a result, you must manage the high roaming costs by negotiating with mobile network operators in each country where you want to provide services. The key is to be able to provide a business proposition to the mobile operators in the form of volume, or quality of the traffic that you bring to their network. At Transatel, our focus is on new business. For example, fewer than 3% of laptops and tablets are connected to the internet with a SIM card. It’s a new business, which is very cheap to implement.

Connected cars – which are potentially a huge business – are a different story. The challenge is to have an agreement with mobile operators everywhere in the world that is optimized for the IoT. We, therefore, had to negotiate country by country. Our coverage at present includes all of Asia, Europe, and North America. We’re working hard to cover all Latin America, Africa, and the Middle East – and we’re almost there!

AI: And in terms of M2M connectivity and IoT solutions?

Bonifay: A connected car is a combination of both a consumer service and M2M connectivity. For example, there’s no consumer in the loop when we connect machine tools for Airbus, but with a laptop, there’s consumer interaction. With a car, both types of connectivity exist. Some services are vehicle-centric, where the manufacturer wants to control the car remotely (for instance for over-the-air firmware updates). That’s M2M or Industrial IoT. Other services are consumer-centric (for instance, when the consumer wishes to have Wi-Fi on board).

AI: How do you address OEMs’ concerns about security and avoiding major lock-in risks?

Bonifay: When you buy a car today, the criteria are price, design, and brand. Tomorrow, it will be price, design, brand, and service. In the same way that 10 years ago, you wouldn’t have been able to imagine the number of services that are available today on your smartphone, it’s difficult to predict the number of services or apps you’ll be able to find in a car. Building on the smartphone experience, we know that to control the vehicle’s apps security, you need to control the car’s network, whether its HLR /HSS is in 3G or 4G and GGSN in 3G or some other standard. OEMs will need to work with global service providers whose systems they can trust, rather than with a host of different mobile operators to cover each region or country.

With the MVNO’s technical architecture and value proposition, and its single, one-time integration, you benefit from a consistent worldwide security layer, and you avoid lock-in situations because you’re always free to switch underlying radio networks.

AI: What is the relationship between vehicle connectivity and the cost of data?

Bonifay: Data volumes have been increasing every year by 10-50%, while the price has been decreasing by 10-50%. Nobody knows what the price of the data will be in three years’ time. Vehicles are made to last around 20 years, with 10 years’ guaranteed service support. To ensure they can continue providing connected services, OEMs would be taking a risk if they entered into a sole-supplier agreement with a telecom operator.

They wish to be independent, with their own automotive network. This is why we believe that car manufacturers are going to become mobile virtual network operators. They will want to be able to manage the split in costs between consumer services and the connectivity between vehicle and manufacturer – the IoT. They will want to be able to separately invoice the likes of an insurance company, Spotify, and the consumer.

When you’ve built this system for Europe, you don’t want to re-invest and start anew with another mobile operator in the United States, for example. OEMs don’t want to take the risk of being dependent on a single provider, which is why we’re providing a platform which doesn’t lock in the OEMs.

We hope to keep the business by offering the best service and solutions on the market. Car manufacturers are used to outsourcing. We’re just one of a new generation of Tier 1 suppliers. Compared to a traditional telco’s solution, the MVNO
solution holds an advantage: it’s much easier to migrate from one radio network to another, and thus maintain negotiation power on data prices, with a long-term perspective.

AI: What infotainment services do you offer to Jaguar Land Rover?

Bonifay: We’re offering connectivity to the consumer for onboard Wi-Fi. Three years’ connectivity are included in the price of the car, and the consumer can top-up for larger data plans via our Ubigi app. Additionally, we provide JLR with connectivity for firmware updates. We cover the UK, Italy, and Germany at the start, and expanding afterward.

AI: Are you targeting the commercial vehicle market as well?

Bonifay: We’re targeting any kind of vehicle. We’re also talking to train or construction machinery manufacturers who need connectivity for predictive maintenance. Technically, our IoT solutions for laptops and tablets, automotive, and industrial IoT are the same solution. At the end of the day, Transatel is an enabler of connectivity.

AI: What’s next for Transatel?

Bonifay: For the laptop and tablet segment, we have agreements with Microsoft Surface, ASUS and VAIO. We’re also launching with two new manufacturers in the US and Europe. I want to ensure that plenty of laptops and tablets are sold with our SIM card inside! In the consumer segment, people aren’t going to pay a lot for connectivity, and we’re subject to competition from the telcos. That’s why we’re investing in a security solution for, whereby for a company like BP, for example, we can provide the same secured connectivity solution anywhere in the world, the way we did for Airbus.

For the automotive segment, we’re hoping to provide full support for Fiat Chrysler Automobiles (FCA) in Europe, building on our existing telematics contract. We’re hoping to launch our services with a new car manufacturer on a different continent.
We’re doing a lot of work in Asia, but are looking to attract additional car manufacturers, as well.

We can also do more in the firmware market segment, or industrial IoT. We have lots of developments with Airbus, which are easily transferable to the automotive sector. And of course, there are other industries, such as oil and gas companies