Verizon Communications, the No.1 U.S. wireless carrier known for its widespread coverage, is falling behind its biggest rival in what many are betting will be the next big thing in the wireless industry: connected cars.
The reason? Simply put, the type of network Verizon uses isn’t global.
The $1.7 trillion wireless industry has just about reached capacity for growth, and mobile companies are turning to connected devices for future revenue. Connected cars, which hook up with a wireless network, currently allow you to do everything from turning an auto into a Wifi link for other devices, to honking its horn from anywhere in the world. The cars are also able to update software remotely.
The market for such technology is just getting ramped up. It produced revenue of $8 billion in 2013 and is expected to bring in $20 billion annually by 2018, according to Juniper Research.
So far, AT&T has announced deals with brands at eight automakers and Verizon is trailing with four announced deals. Sprint has announced two and T-Mobile has announced one. The value of such deals have not been disclosed.
Verizon, for its part, rejects the notion that it is falling behind. It says it is offering more robust services to consumers and auto makers than its rivals.
GLOBAL ADVANTAGE
But AT&T appears to have the edge because its network uses specifications that have become a global standard, analysts and consultants said. Verizon’s network specs are only used in a handful of countries.
While that hasn’t stopped Verizon from becoming the United States’ most popular carrier, it puts the company at a disadvantage with automakers who want to manufacture cars that work on a common standard worldwide.
AT&T has also developed a universal SIM card for cars, tractors and shipments that can be programmed remotely to adapt to networks around the world. Verizon has to install location-specific settings on cars depending on where they are shipped.
The global reach of AT&T’s network type was a key factor in Audi’s decision to sign a deal with AT&T in early September. “We needed a foreign app that was acceptable in Europe and the U.S.,” said Brad Stertz, Audi’s corporate communications manager. “That narrowed the choices for us at that point.”
Unlike AT&T’s 3G network, Verizon’s does not allow customers to make a phone call and access the Internet at the same time. So in an emergency, Verizon’s connected cars can’t diagnose problems with vehicle through its data network and call the customer through the car at the same time.
This factor was one of the reasons General Motors Co. signed a deal with AT&T in February 2013 for a new line of connected cars, after almost 20 years in partnership with Verizon.
“We all multi-task every day, so why shouldn’t our cars multi-task?” said Kevin Jackson, a connected customer specialist at General Motors.
THE COMEBACK?
That’s not to say that Verizon cannot catch up. A new wave of technology known as Long-Term Evolution will eventually override the distinction between the two network types. By transforming voice calls into data, the technology will allow Verizon users to place calls and access the internet simultaneously. But analysts said automakers may have to wait until 2020 before the technology can be reliably used. At that point, they add, it may be too little, too late for Verizon.
Verizon’s president of Telematics, Erik Goldman disagrees. The company, which in 2012 bought Hughes Telematics, a maker of voice and data connectivity systems for cars, is not providing just a wireless connection, he said.
The company answers customer help lines for support on vehicles, trains car dealers to know how to properly activate the connection in the cars and helps customers with billing issues. Unlike AT&T, the company does not partner with any third party for these services.
“Our strategy is to do the entire ecosystem ourselves. It allows us to participate up and down the value chain,” said Goldman.
Another sign of life for Verizon: Wireless carriers often sign deals not with an automaker as a whole, but for a particular make and model of a line of cars, leaving Verizon plenty of opportunities to score deals with automakers around the world.
For example, AT&T’s deal with Audi only encompasses the A3 and Q3 cars, leaving other Audi models up for grabs.
Said Elizabeth Kerton executive director of the Autotech Council, which connects car companies with technologies and start ups: “I would not recommend AT&T get lazy.”
Reuters