Connected Cars: A New Service Offering?

Generally, there are two main approaches to bring a car online: tethering it to a smartphone or having the communication system “baked in”.

Leveraging the driver’s smartphone to tether a connection is cheaper to implement, thus it’s a better choice for cars competing in the low-to-middle price tiers. This option doesn’t require a separate data plan, saving users from an increased cost. However, additional data usage requirements may require users to increase their bandwidth allotment. Also, when the driver walks away, the car is no longer connected. It’s a pseudo-connected car, and although it isn’t fully connected, it has an appeal to the mass-market segment. Some manufacturers like Honda are developing setups that leverage the smartphone to do all the processing to further reduce costs.

Baking the communication system in provides better integration and fully connects the vehicle. Even if the driver is far away, the system can operate in a low-power state by tapping into the car batteries. This opens some interesting remote (over-the-Internet) control capabilities and automated notifications. However, this option is more expensive to implement and requires a separate data plan for the user. Thus, it is currently targeted at early adopters and the luxury market. Manufacturers like Tesla Motors are trying to spur adoption by subsidizing the data subscription for the first year. Nevertheless, these extra costs are pretty nominal, and they’re poised to decrease as we move forward.

What are the implications for service providers? As more cars roll out of factories equipped to go online, there will be greater demand for more data. This could be a boon for service providers. However, a data connection isn’t necessarily a requirement to operate a vehicle, and it may be up to the automakers to convince drivers to connect their cars. The automakers are also getting help from Apple and Google — both companies are beginning to compete in the connected car space. Perhaps service providers shouldn’t sit on the sidelines and instead proactively roll-out new services tailored for connected cars.