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THE EMERGING MARKET OF INFOMOBILITY SERVICES
THE EMERGING MARKET OF INFOMOBILITY SERVICES Markus Kauber ABSTRACT In this article the current market situation in the field of infomobility services is described. An outlook on developments that can be expected in the near future is also provided. The collected data and outcomes are related to a market study which was carried out during the first half of the IMAGE project phase (IST-2000-30047) by evaluating market reports of well known research institutes and various Internet sources. The survey was restricted to tourism and travel related infomobility services.
1. INTRODUCTION Communication is one of the most important social requirements for successful interaction among all species. Therefore it is no wonder that the market for mobile communication is considered valuable and promising by all types of market players. Ever since the idea of commercially distributing letters, this market developed quickly and attractively. Since the possibility of enriching communication with almost any kind of additional data, market players believe they are walking on air. Naturally this development has led to severe changes in the traditional market structure. Former monopolists such as telecommunication companies are more and more forced to share their field with other newly emerged competitors. Most of the research results are mainly related to a market study that was carried out during the first half of the IMAGE project phase. IMAGE stands Economic Impacts of Intelligent Transportation Systems: Innovations and Case Studies Research in Transportation Economics, Volume 8, 69–87 © 2004 Published by Elsevier Ltd. ISSN: 0739-8859/doi:10.1016/S0739-8859(04)08004-7
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for Intelligent Mobility Agent for Complex Geographic Environments. The goal of IMAGE is to provide the users with mobile, personalised, location based information on services, how to reach them and how to pay for them with flexible mobile and stationary means. With this in mind the basic questions one has to ask in evaluating the potential market for Infomobility services are: Where are the markets for Infomobility services? Which products are demanded by the market, and which of them can be provided by such a service? The European mobile communication market these days has to struggle with many different threats and challenges. The only thing that can be taken for granted in the future is the fact that nothing will be the same as before. iMode, the “hyper service platform” from Japan and the open discussions about the threads of radiation to human health are just a few examples of tasks the “traditional” European market players cannot avoid dealing with during the next decade. In the following, the general market structure in Europe and the demand for infomobility services are described. If possible, a brief excursion to the U.S. and Austral-Asian market was made. An emphasis was lead on the infomobility market in the travel, tourism and telematics sector.
2. THE EUROPEAN MARKET STRUCTURE One promising strategy for the successful implementation of so called infomobility services is co-operation among potential market players. An example that can already be observed on the market is the increasing integration of content providers, network operators and service providers. However, it is still very difficult for any service provider to gain access to any kind of content. Especially public authorities, who normally have attractive content for mobile services (e.g. public transport, touristic locations), are very often difficult to convince to make their data accessible. Reasons for this are for example legal issues or the still common difficulties to generate revenue out of any mobile service. Different kinds of networks and non-compatible devices and applications are the major obstacles that have led to a common reduction of the market development. More and more market players have realised this and have started to search for possible partnering opportunities. In order to introduce user-friendly and attractive services it is inevitable that devices and applications will be able to communicate among each other and across national and international networks. This requires the implementation of intelligent and open interfaces.
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According to Andersen (2001) seven main success criteria exist for mobile services, which are: multi-channel strategy; personalisation and customisation; ability to “push” data; mobile payment; international roaming; device and operator independent services; security. To place products in the B2C (Business to Consumer) market sector is a very difficult task. Immense sums of money are needed to carry out professional marketing and market analysis. Thus the main market for IMAGE will be the B2B (Business to Business) sector. All testbeds of the project could be seen as showcases where interested and already established companies could inform them selves about the developed products such as agents, services, and interfaces. These companies are thought to carry the products into the market by eventually licensing them from the IMAGE partners. The four main categories of market players are: operators (OP); content providers (CP); billing agencies (BA); service providers (SP). It is very difficult to differentiate between these four types of players. Today it is most likely that SP’s, OP’s and even CP’s are assembled under one company logo. Telecommunication companies are an example. Whereas some years ago there was a bilateral relationship between a user and a (mobile) operator this constellation has changed into a multilateral relationship where a user – in the worst case – has to deal with the operator, the (application-) service provider and the content provider at the same time. The revenue flow might be even more complicated due to the fact, that it has to be shared in some way among all players who are involved in a mobile service. Figure 1 depicts the components of the value chain that ultimately leads to the end user. As mentioned before the trend shows a market consolidation after which the above value chain could be represented by different departments of one large international company. The market for navigation systems includes both the competitors and the external factors that influence the entire market. On the one hand the direct
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Fig. 1. The mCommerce Value Chain. Source: (Durlacher, 1999).
competitors, who develop and provide similar products, are important. On the other hand competing product groups also exist that have established themselves in this market segment or which are still to be established. External factors such as available end devices, communication costs and map licences, however, strongly influence the work of service providers in the field of geographic information services. The various product groups target the entire navigation services market. These are: The “classic” Internet router: With the introduction of UMTS (Universal Mobile Telecommuications System) the routers known in the Internet will be available to a large extent using mobile end devices. First solutions already exist as WAP (Wireless Application Protocol) services. This group of services does not provide a turn-by-turn navigation for the traveller. However they provide a route list and a map which can provide the information required. Furthermore the route calculation can be performed while including the current traffic conditions and it is also possible to include points of interest. These products will be at the lower end of the price range. Basic services can still be available free of charge here. Mobile router: Routing applications (from a PC to a Personal Digital Assistant) are available on the market. They do not provide turn-by-turn navigation. As soon as a global positioning system (e.g. GPS) is linked to the PDA however, some products provide the possibility of showing the current location on the map. In this way basic orientation is provided. This product is also situated at the lower end of the price range, whereby the difference must be made between the application and the maps, that is, the maps and routes are pre-calculated on a PC and then transferred onto the PDA running the routing software. It must be assumed that the map sections will be separately marketed in the future.
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Mobile Navigation: PDA navigation systems are currently available on the market. GPS and localisation modules provide a turn-by-turn navigation for the user. A similar level of quality to the on-board navigation can be achieved here. Through the mobile network these systems also load a map section from a central server to the PDA on which an application routes independently. Due to the large amounts of data the provision of map sections to the mobile device is only possible to a very limited extend. UMTS will provide a suitable bandwidth for data transfer. However, the transfer costs can still be considered as too high for a normal consumer, which reduces the attractiveness of such a service enormously. On-board navigation: On-board navigation is currently the benchmark navigation solution in vehicles. The current development in this area is demonstrated by the fact that the systems can be accessed on-line, i.e. here both traffic conditions and travel information can be transferred to the client dynamically via mobile network. Off-board navigation: The idea of the off-board navigation system has been around for some years. First services are specified in the GATS (Global Automotive Telematics Standard) from the year 1998. Looking at the last 4 years, no solutions at all were available at the start as no end devices were available to support the GATS. The situation first changed with the introduction of the first PDAs to the market which were compatible with Windows CE. They form a suitable platform for implementing a client-software for the off-board navigation. The future market development will be influenced by a number of devices including 3G (3rd Generation Mobile Networks). First off-board navigation systems are already on the market. According to the market analysts from Durlacher (2000) the U.S. is the world leader in regards to Internet adoption and eCommerce. In comparison, however, the mobile sector falls behind that of Europe and Japan. The main reason can be seen in the difficulties of network coverage and many different standards, differing from region to region. UMTS licence auctions are believed to be held in the second half of 2002 but can also be postponed as agreements on the sharing of frequencies still do not exist (Teltarif, 2001). Another fact which complicates the situation in the U.S. mobile market is the existing billing system: Both, the caller and the recipient have to pay for the connection. Thus many customers in previous years just switched their devices off in order to save money. Therefore the UMTS principle of being “always on” did not apply. This might also be one reason why the market for PDA’s in the U.S. is still bigger than the one for mobile phones. The short message service (SMS), that became by far the most popular mobile service in Europe is lacking acceptance in the USA due to the fact that the new services, which were only
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recently introduced do not allow short messages to be sent between the different provider’s networks. People who use SMS are still restricted to one provider, although this constraint is now gradually vanishing. As mentioned in the first paragraph the U.S. is a world leader in the number of fixed Internet subscriptions. This is one reason why this market is considered valuable by the Durlacher (2000) analysts. For example, NTT DoCoMo from Japan (iMode) has owned 16% of AT&T Wireless Group since recently. (Why is this important?) According to KPMG (2001) the market of mobile audio devices in the U.S. will reach 90 million units in 2005. In Australia the two major players are Telstra and C&W OPTUS. They occupy 90% and 6% of the local access market, respectively (Bis Shrapnel, 2001). According to analysts form BCG (2000) the following figures can be expected for the Australian B2B market: Transaction values will increase from an estimated $17 billion in 2000 to $235 billion by 2005. By 2005, 22% of all transactions between businesses in Australia will be online. Financial services and the logistics industry are likely to be early adopters. Enablers such as trusts and payments are vital to B2B eCommerce. The Japanese iMode Service can be seen as an example for the successful integration of different market players under one brand, although there was the advantage of the strong market position of NTT DoCoMo. iMode was introduced to the European countries during the last year in co-operation with ePlus. It is still highly questionable whether this service will be as successful in Europe as it is in Japan (18 million subscribers in 2001). The main reason for this is the fact that customers in Japan were already accustomed to mobile services from the start. Fixed Internet connections never gained the kind of popularity they have in Europe or the United States. In the first years of mobile networks in Japan NTT DoCoMo already possessed such a strong market position, that it was able for mobile operators to dictate terminal specifications to handset manufacturers (for example screen size, iMode Button). Application developers were forced to adopt guidelines introduced by the market leader, who was then able to provide 70 different services by the launch of iMode. As similar strong competitors such as the au Group, J-Phone Group and TU-KA Group start to appear on the Japanese market (Table 1), NTT DoCoMo can profit from very strong contractual agreements with other companies, such as developers, content providers and device manufacturers. According to the analysts from Durlacher the following are the key success factors for the Japanese mobile market:
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Table 1. Comparison of Japan’s Mobile Data Services. i-Mode
Ezweb
J-Sky
Company Markup language Microbrowser IMAGE formats Handset display colour capability E-mail length for sending E-mail length for receiving E-mail attachments Current network
NTT DoCoMo CHTML Compact netfront GIF 256
KDD/au-Group HDML (WAP) EZ browser BMP/PNG 256
J-Phone MML Proprietary PNG/JPEG 256
500 500 None Packed-switched
6000 6000 IMAGEs/melodies Circuite-switched
Speed (Bps.)
9600 (28 kb on DoPa)
3G Standard 3G Launch
W-CDMA May 2001
510 4000 IMAGEs/melodies Circuite- and packed switched 9600 (6400 on cdmaOne) CDMA2000 Second half 2002
9600 W-CDMA Q4 2001
Packed-based networks provide always-on connectivity which provides customers with the benefits of immediacy; speeds with 9.6 kbps are comparatively low, but applications are very useful; the prices for services are low. iMode customers may pay up to 3 Euro per month for a service channel. Users can also be charged by byte, whereas the price per byte is low, and many services are free of charge; low-usage of fixed line Internet access; applications messaging, ringing tones and wallpaper downloads attract the youth, who are considered a very profitable group of customers.
3. TECHNOLOGY AND SERVICE TRENDS The market for mobile communication is becoming more complex by the day. Not only is the number of players steadily increasing, but also the number of market segments which are covered by new technologies. Introducing IPv6 (Internet Protocol Version 6) will even intensify this development. Former data and communication-only networks will have to deal with warming up cars, fridges that prepare the shopping list or TV sets which want to know what they should do in the evening. All devices which are part of any kind of communication network will be identified by their IP address, thus enormously extending the market for application developers, service providers, content providers, device manufacturers and operators. Any device in a network with an IP address could theoretically
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be contacted from anywhere and involved in some kind of communication. For example the preparation of a journey could be done by a mobile agent who visits all necessary databases autonomously, just triggered by a user. However, the introduction of the IPv6 standard into the market is currently lacking acceptance by address providers and device manufacturers due to the still high amount of conventional address space (IPv4) available in the Internet. An exception are the Asian regions in which providers and manufacturers are already running out of free address space (Heise Online, 2003a, b). The obvious tendency for integrating services and the trend to co-operations between content, service, and network providers will require the implementation of intelligent and open interfaces as it is increasingly realised in XML (Extensible Markup Language) and SOAP (Simple Object Access Protocol) technology. The latter one is known these days mostly because it is already one step ahead of pure XML and promising for the task of inter-connecting the services and content of different market players with easy means. This so called “Web services” are based on a client – server architecture which is supported by both, Sun (Java) and Microsoft (.NET). Any party that wants to make use of the Web services of another company just has to implement the client-side part in it’s system architecture by adopting the functions and data structure that is described in the automatically generated Web Services Description Language (WSDL) file. Thus, one could assume, that Web services should also support mobile end devices such as PDA’s directly. In fact, Microsoft has announced to introduce a development kit for mobile devices during this year. The current market developments, however, show that the two competitors more and more drift apart. One the one hand there are Sun and Oracle which support the W3C efforts for a standard, and on the other hand there are Microsoft, IBM and SAP who try promote their own developments (Business Process Execution Language for Web Services, BPEL4WS) (Heise Online, 2003a, b). The idea is to make all available Web services public in a web directory, the Universal Description, Discovery and Integration (UDDI), thus enabling all interested parties to easily find and connect to the desired services. In this context UDDI is also a platform to present ones own company and it’s Web services. In addition to this development it can be also surveyed that there will be intelligent and mobile agents, which are able to perform self-triggered, autonomous and personalised interactions between different services and their content. More standards, better development kits and many EU funded projects in this area indicate, that this technology will play a major role in the future infomobility market. As cell-based positioning is too inaccurate for navigation it can be expected that in the future most handheld devices will be equipped with a GPS or GALILEO receiver (Spatial, 2002). Or at least there will be a mixture of cell-based and
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satellite navigation. It seems that GPS will be introduced more and more in mobile phones, PDAs and even watches. Garmin is launching its NavTalk II phone soon and thus starting to compete with Benefon. SiRF Technology is forming an alliance with Motorola for the integration of SiRF’s GPS technology into its iDEN (Integrated Digital Enhanced Network) family of digital wireless phones. In addition Sony Ericsson is introducing their T206 in the autumn 2002 featuring GPS for emergency and location-bases services. In addition to these GPS phones, there is a range of GPS add-ons for standard mobile phones. In the USA Airbiquity is providing an add-on for Nokia phones. Chapman technologies is developing its GPS add-on for Ericsson’s new T60c mobile phone. The updated Nokia Communicator 9210i and the Nokia 7650 Smart Phone are already available in Europe and in Asia. This will move the Nokia Communicator into a new phase. All these developments taken together will encourage mobile operators to consider evolutionary path for positioning technology. The GPS handsets are becoming very interesting for European mobile operators. Many of them are interested to know, whether it would be preferable to implement GPS technology straight after the cell-ID stage. This would make E-OTD technology redundant (Enhanced Observed Time Difference). In practice several operators will adopt “wait-and-see” policy until the market situation is clarified. Whatever the fate of E-OTD technology, the future is bright for the “middleware” and location-based application vendors. Middleware technology is designed to interface with any positioning technology, whether it is network based or handset-based. LBS (Location Based Services) application vendors are similarly well placed. It is also very important to not focus on UMTS alone. Wireless LAN could be a major competitor to UMTS networks and has the advantage that it is already available today and normally needs the telecom operator only for the connection to the Internet. The connection speed is not comparable to UMTS. New developments such as the 802.11a standard in the U.S. will provide up to 56 MBit/s whereas already today 11 MBit/s are possible (Heise Online, 2002a, b, c). Some analysts therefore believe, that there will be a market split. UMTS and 2-way satellite communication will be used to cover larger and global distances, whereas WLAN and Bluetooth (Micro- and Pico-Cell) will be used for local area networks (LAN), for example in cafes or office blocks. In fact, it is much more likely that a mixture of different communication channels will emerge comprising the different technologies WLAN, UMTS, Bluetooth and two-way satellite communication. In the U.S. it is expected that WLAN will lead the market due to a lack of standards among mobile operators. Until 2006 it is expected that about 20 million people will use WLAN in Europe (Heise Online, 2002a, b, c). Another issue of no less importance than bandwidth will be the security of dynamic or static private user data. Especially while depending on user profiles
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Fig. 2. End to End Security. Source: (Durlacher, 2000).
for providing an attractive service it is most vital to be able to guarantee security of private user data from the beginning and on all levels of communication (end to end). The struggle and common rejection of previous mobile services, especially those with mobile payment functionality, is due to the fact that up to today the question of the security of user data is not taken seriously enough by most service providers. The efforts of different governments after the 11th September to weaken data protection legislation may lead to a further slow down of the market development as soon as end users gain first experiences with this new situation. Experts estimate, that about 80% of all potential online payers do not complete their purchases due to insecure systems and incompatible standards (Heise Online, 2002a, b, c). A solution would be to implement an end to end security model as shown in Fig. 2. Private user data will be securely transmitted between the end devices, gateways and servers. Market segments in which functioning mobile applications and services already exist can be found in the B2B sector, such as automotive and logistics. The disadvantage is that these solutions are normally restricted to relatively inflexible company networks (Intranet). The sixth framework programme of the European Commission is prepared to spend billions of Euro in order to harmonise the market by funding all kinds of interdisciplinary projects and developments, such as OPIUM (Open Platform for Integration of UMTS Middleware) and RUI253 (Recommendations for Internet Usage on 2.5 and 3G). This leads to another sector within the area of infomobility services: Navigation systems. Navigation systems more and more develop to guidance systems, that is, information systems along the route. Information can be filtered with regards to the route ahead and provided in time to the driver. This trend will continue and the (on-board) navigation system becomes more and more embedded in an multi purpose in-car information platform (e.g. with data exchange with a PDA). The
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integration with other services (beyond today’s emergency services) will continue. As in other areas, the client-server approach used for off-board navigation will be useful to link different services and content layers at the service centre instead of overburdening the in-car system. Hybrid navigation – the blending of on-board and off-board information sources to provide the navigation service – is another development strand in this area. The opportunities to supplement and update the information base on-board are numerous and are likely to materialise in the coming years. The same goes for the so called Advanced Driver Assistance Systems (ADAS) which promise to increase safety significantly in the future. Certain systems in this group require data mapped with high precision onto a digital map. The map data base and the localisation provided by the navigation systems is likely to be one component which will be used by these systems, e.g. to provide speed limit information in time or to warn of over-speed in relation to certain road conditions. Off-board and hybrid navigation also pave the way for another type of navigation service: Pedestrian Guidance Systems. Mainly two facts in technology development make this service attractive. On the one hand there are the advanced capabilities of smart phones (e.g. integrated GPS, large colour display) and on the other there is the client – server based architecture of modern navigation systems (calculations on a central server and the results are transmitted to the client device). Why shouldn’t such systems also guide pedestrians or cyclists? Voice guidance and very detailed city maps could become essential for future mobile tourism and traveller services.
4. MARKET SIZE 4.1. Telecommunications Market The emerging new technologies and services in mobile communications will offer new business opportunities: the change from voice communication towards mobile multimedia (mobile contents). The users are interested in new services if/when they are just reasonably priced. This development will affect a great deal of businesses related to mobile service provision, since they will be enormously multiplied thanks to new multimedia terminals, agent technology and possibilities to differentiate between the simple Internet access and the added value services. The revenue from location based services is not expected to be very high as shown in Fig. 3. This fact will lead to a market consolidation in which only the players who are able to provide attractive content and services will survive. This trend can already be observed today (OTS, 2002).
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Fig. 3. World Wide Revenues.
According to the outcomes of the IMAGE market survey the acceptance of new generation mobile services by a relevant number of users can be expected around the year 2005. By this time the number of mobile subscribers will also exceed the number of fixed wire-line subscribers. This is due to the fact that wireless networks and devices will not be sophisticated enough for mobile communication and other attractive mobile services of the 3rd generation before this time. As shown in Fig. 4 the most attractive offers to the consumer after the year 2005
Fig. 4. World-Wide Subscriptions to Selected Services.
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Fig. 5. Total Mobile eCommerce Revenues.
will be normal voice services, location based services, applications for mobile business (B2B) and services in the area of travel and tourism. The precondition for all these services will be a high bandwidth for the transfer of geographic data, as well strong graphics capability. The demand for location based and tracking services will increase, but it is difficult to estimate the future revenues for these services. It is expected that the demand will increase more then the revenue for these services. Based on the fact, that 30% of all eCommerce revenues will be provided by B2B relationships, there is a good reason for IMAGE to concentrate on this market (Fig. 5). 4.2. Automotive Market In the following, a market penetration scenario for navigation systems is presented based on statistics of the vehicle and navigation market and their projections. Figure 6 shows the growth of the navigation market during the last seven years. Today the high-end vehicles are already outfitted with navigation systems. The development shows that the products are accepted by the customers. However, the entry in the lower vehicle classes needs cheaper solutions. The off-board navigation offers the biggest potential in this case. The market situation for car navigation systems is structured according to different car classes (ACEA: EU, 2001): upper classes: including upper-middle, and executive cars. The estimated market share (new cars) is 33%. It will not increase significantly over the next 10 years,
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Fig. 6. Total Navigation Market 2001.
but the absolute number of new cars is sizeable. Therefore the number of upper class cars will be approximately 5 million in 2003 and 5.5 million in 2010. lower classes: lower-middle class and small cars. Corresponding to the number of upper class cars the estimated market share is 67%. Therefore the number of lower class cars will be approximately 10 million in 2003 and 11.5 million in 2010. OEM navigation system sales are modelled with typical S-shaped penetration curves. It is assumed that navigation systems in general have similar time-spans for market penetration as other in-car equipment. This time span is generally 8–12 years, once a technology starts to enter niche markets (e.g. luxury vehicles). Figure 7 shows the growth of the OEM Navigation market over the next ten years. The estimation reflects the result of a European market study (Commerzbank, 2001) and projections by the consortium. For the upper classes a point-to-point communication channel is considered standard equipment. For transparency, navigation systems are split into on-board and off-board navigation systems, although this distinction is expected to vanish in the future (“hybrid navigation”). On-board systems will further develop and their technological trends (towards hybrid systems and their integration in larger service and telematics packages) are geared by the high-end market. With some delay, the on-board technology
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Fig. 7. Market Expansion of Navigation Systems.
will popularise and also penetrate lower price segments (i.e. become equipment in smaller cars). Off-board systems represent the market segment of navigation technologies where investment cost is much lower, hence they are expected to penetrate first in the lower class cars. Off-board systems are also expected to develop significantly towards hybrid approaches, but their penetration in the upper class cars is expected later and more slowly. Especially the introduction of advanced telematics platform will push the off-board navigation in the upper middle class. For both systems, the OEM market and the aftermarket are considered. While new cars are the target market for OEM navigation systems, the vehicles with less than 2 years (and without and OEM navigation system) are considered the target Table 2. Penetration Rates of Navigation Systems in Different Vehicle Systems. Year
2003 2004 2005 2006 2007 2008 2009 2010 a Relative b Relative
OEM Upper Classa
OEM Lower Classa
After Marketb
On-Board (%)
Off-Board (%)
On-Board (%)
Off-Board (%)
Off-Board (%)
28.0 35.0 42.0 50.0 60.0 68.0 74.0 80.0
0.0 0.0 1.5 2.7 3.5 5.0 7.0 9.0
0.0 0.0 1.0 2.0 4.0 7.0 10.0 13.0
1.5 5.5 9.0 12.5 16.0 19.5 23.0 27.0
1.7 1.9 2.0 2.3 2.7 3.7 5.1 6.5
to annual new car sales in the segment. to all cars less than two years old without navigation.
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Fig. 8. Penetration of Off-Board Navigation.
to aftermarket products. The aftermarket production is linked by an assumed rate to the OEM sales. Table 2 shows the estimated penetration rate considering both the two defined car classes and the after market. Through a fleet-turnover calculation – the active stock of navigation systems in the fleet are those sold during the last 6 years – we estimate the fleet penetration with navigation systems considering market and sales figures and projections (Commerzbank, 2001). The result of this calculation is shown in Fig. 8. To compare the estimated penetration rate of the off-board navigation in the automotive sector with the estimated subscriber in the telecommunication sector the cumulative figures in 2005 are decisive. In this year about 2.000.000 OEM and 1.500.000 after market user are expected. In total we will have 3.500.000 off-board units linked to a car.
5. CONCLUSIONS Today it can be said that the market of mobile communication services is occupied by two major types of players: Telecommunication and automotive companies. Up to today both market players try to offer similar services to their customers, but with a different lobby standing behind them. It is only a question of time until this possibility of differentiation will vanish. Public authorities as high potential content providers more and more co-operate with service providers as they begin to realise the advantages of mobile services especially in the tourism and travel sector.
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5.1. The Telecommunication Sector According to the outcomes of this market survey the acceptance of new generation mobile services by a relevant number of users can be expected around the year 2005. By 2005, the number of mobile subscribers will also exceed the number of fixed wire-line subscribers. This is due to the fact that wireless networks and devices will not be sophisticated enough for mobile communication and other attractive mobile services of the 3rd generation before this time. Taking a certain error ratio among the market analysts into account it can be said that the most attractive offers to the consumer after the year 2005 will be normal voice services, location based services, applications for mobile workforces (B2B) and services in the area of travel and tourism. The precondition for all these services will be a high bandwidth for the transfer of geographic data, which give a service most of its attractiveness as well as other graphics capabilities. The demand for location based and tracking services will increase, but it is difficult to estimate the future revenues for these services. It is to be expected that the demand will increase more then the revenue for these services. Another issue with no less importance than bandwidth will be the security of dynamic or static private user data. Especially while depending on user profiles for providing an attractive service it is most vital for any kind of project to be able to guarantee security of private user data from the beginning and on all levels of communication. The struggle and common rejection of previous mobile services, especially those with mobile payment functionality, is due to the fact, that up to today the question of the security of user data is not taken seriously enough by most service providers. Experts estimate, that about 80% of all potential online players do not complete their purchases due to fear of insecure systems and incompatible standards (Heise Online, 2002a, b, c). Vodafone has just recently started a new m-payment initiative (“m-pay”) which is thought to be introduced in almost all over Europe (Mobiforum, 2002). The goal is to enhance the mobile phone with payment functionality (3G Mobile, 2002). Another point which fits in this area is the use of user profiles within a communication platform such as IMAGE. As soon as users lose control over their data they will very quickly start opposing mobile services of any kind. For example they may not be able to refuse mobile advertising because it automatically appears on their devices, or because they receive advertisement after their profiles were sold to an unauthorised party. Up until today it has been highly questionable as to whether UMTS will be such a success as it is still predicted by many analysts. One major obstacle is the high implementation costs of the network and a lack in end devices. In fact, it is much more likely that a mixture of different communication channels will emerge
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such as Wireless LAN (which has a very high potential for success due to its low implementation costs), UMTS, Bluetooth and two-way satellite communication. Until 2006 it is expected that about 20 million people will use WLAN in Europe (Heise Online, 2002a, b, c).
5.2. The Automotive Sector The automotive and telematics sector is also highly affected by the ups and downs of the mobile services market. More and more automobile manufacturers already offer or at least plan to provide their customers with high end mobile services. Those services are mainly located in the area of navigation, location based services and tourism. Former on board navigation systems which were strongly bound to the car are now becoming more and more mobile. They are now highly integrated, multi functional service stations which offer to the driver, for example, POI (Point of Interest) along a route according to the drivers user profile, dynamic routing capabilities by integrating dynamic traffic data into the route calculation and an enormous flexibility because the devices could be smart phones in future, which get their route calculation online. The cost situation, at least in many countries within Europe, meanwhile exceeded the bandwidth as an obstacle for the broad introduction of such services. For a normal everyday customer they are simply to expensive, which leads to the situation that they are (if at all) only implemented in upper class cars. As long as hardware and connection costs do not represent an acceptable cost benefit relationship to the end user, they will remain in a niche sector.
REFERENCES 3G Mobile (2002, January). Vodafone starts testing mobile-wallet initiative. Newsletter Volume 4. ACEA: EU (2001). Sales and fleet statistics of passenger vehicles, www.acea.org. Andersen, A. (2001). mCommerce – More hype than substance? Financial Services, 1(01). Bis Shrapnel (2001). Telecommunications infrastructures in Australia 2001. Research Report prepared for the Australian Competition and Consumer Commission (ACCC). Commerzbank (2001, May 9). Europ¨aische telematik-industrie – Open road ahead. Durlacher (1999). Mobile commerce report. Durlacher Research Ltd. Durlacher (2000). UMTS report. An investment perspective. Durlacher Research Ltd. Heise Online (2002a, March 7). Vielfalt an bezahlsystemen bremst eCommerce. Heise Online (2002b, March 9). Auch Briten wollen WLAN-hotspots. Heise Online (2002c, April 22). Funk-LAN: Schneller und kompatibel. Heise Online (2003a, April 17). Web Services konkurrieren nicht – nur ihre Standards. Heise Online (2003b, April 18). (IPv6-) Wunder dauern etwas l¨anger.
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KPMG (2001, November). Billing trends in communications industry – U.S. focus. Presentation of John Perkins, KPMG Consulting. Mobiforum (2002, September 20). “Vodafone m-pay”: At last, mobile payment without registration. MobiFourm Newsletter. OTS Newsletter (2002, January 14). Drahtlos surfen in der Wiener Innenstadt. Newsletter. Spatial Newsletter (2002, February 28). Trimble and ESRI Form strategic alliance for mobile GIS solutions. Newsletter. Teltarif. http://www.teltarif.de/arch/2001/kw36/s6099.html.
1. INTRODUCTION Communication is one of the most important social requirements for successful interaction among all species. Therefore it is no wonder that the market for mobile communication is considered valuable and promising by all types of market players. Ever since the idea of commercially distributing letters, this market developed quickly and attractively. Since the possibility of enriching communication with almost any kind of additional data, market players believe they are walking on air. Naturally this development has led to severe changes in the traditional market structure. Former monopolists such as telecommunication companies are more and more forced to share their field with other newly emerged competitors. Most of the research results are mainly related to a market study that was carried out during the first half of the IMAGE project phase. IMAGE stands Economic Impacts of Intelligent Transportation Systems: Innovations and Case Studies Research in Transportation Economics, Volume 8, 69–87 © 2004 Published by Elsevier Ltd. ISSN: 0739-8859/doi:10.1016/S0739-8859(04)08004-7
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for Intelligent Mobility Agent for Complex Geographic Environments. The goal of IMAGE is to provide the users with mobile, personalised, location based information on services, how to reach them and how to pay for them with flexible mobile and stationary means. With this in mind the basic questions one has to ask in evaluating the potential market for Infomobility services are: Where are the markets for Infomobility services? Which products are demanded by the market, and which of them can be provided by such a service? The European mobile communication market these days has to struggle with many different threats and challenges. The only thing that can be taken for granted in the future is the fact that nothing will be the same as before. iMode, the “hyper service platform” from Japan and the open discussions about the threads of radiation to human health are just a few examples of tasks the “traditional” European market players cannot avoid dealing with during the next decade. In the following, the general market structure in Europe and the demand for infomobility services are described. If possible, a brief excursion to the U.S. and Austral-Asian market was made. An emphasis was lead on the infomobility market in the travel, tourism and telematics sector.
2. THE EUROPEAN MARKET STRUCTURE One promising strategy for the successful implementation of so called infomobility services is co-operation among potential market players. An example that can already be observed on the market is the increasing integration of content providers, network operators and service providers. However, it is still very difficult for any service provider to gain access to any kind of content. Especially public authorities, who normally have attractive content for mobile services (e.g. public transport, touristic locations), are very often difficult to convince to make their data accessible. Reasons for this are for example legal issues or the still common difficulties to generate revenue out of any mobile service. Different kinds of networks and non-compatible devices and applications are the major obstacles that have led to a common reduction of the market development. More and more market players have realised this and have started to search for possible partnering opportunities. In order to introduce user-friendly and attractive services it is inevitable that devices and applications will be able to communicate among each other and across national and international networks. This requires the implementation of intelligent and open interfaces.
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According to Andersen (2001) seven main success criteria exist for mobile services, which are: multi-channel strategy; personalisation and customisation; ability to “push” data; mobile payment; international roaming; device and operator independent services; security. To place products in the B2C (Business to Consumer) market sector is a very difficult task. Immense sums of money are needed to carry out professional marketing and market analysis. Thus the main market for IMAGE will be the B2B (Business to Business) sector. All testbeds of the project could be seen as showcases where interested and already established companies could inform them selves about the developed products such as agents, services, and interfaces. These companies are thought to carry the products into the market by eventually licensing them from the IMAGE partners. The four main categories of market players are: operators (OP); content providers (CP); billing agencies (BA); service providers (SP). It is very difficult to differentiate between these four types of players. Today it is most likely that SP’s, OP’s and even CP’s are assembled under one company logo. Telecommunication companies are an example. Whereas some years ago there was a bilateral relationship between a user and a (mobile) operator this constellation has changed into a multilateral relationship where a user – in the worst case – has to deal with the operator, the (application-) service provider and the content provider at the same time. The revenue flow might be even more complicated due to the fact, that it has to be shared in some way among all players who are involved in a mobile service. Figure 1 depicts the components of the value chain that ultimately leads to the end user. As mentioned before the trend shows a market consolidation after which the above value chain could be represented by different departments of one large international company. The market for navigation systems includes both the competitors and the external factors that influence the entire market. On the one hand the direct
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Fig. 1. The mCommerce Value Chain. Source: (Durlacher, 1999).
competitors, who develop and provide similar products, are important. On the other hand competing product groups also exist that have established themselves in this market segment or which are still to be established. External factors such as available end devices, communication costs and map licences, however, strongly influence the work of service providers in the field of geographic information services. The various product groups target the entire navigation services market. These are: The “classic” Internet router: With the introduction of UMTS (Universal Mobile Telecommuications System) the routers known in the Internet will be available to a large extent using mobile end devices. First solutions already exist as WAP (Wireless Application Protocol) services. This group of services does not provide a turn-by-turn navigation for the traveller. However they provide a route list and a map which can provide the information required. Furthermore the route calculation can be performed while including the current traffic conditions and it is also possible to include points of interest. These products will be at the lower end of the price range. Basic services can still be available free of charge here. Mobile router: Routing applications (from a PC to a Personal Digital Assistant) are available on the market. They do not provide turn-by-turn navigation. As soon as a global positioning system (e.g. GPS) is linked to the PDA however, some products provide the possibility of showing the current location on the map. In this way basic orientation is provided. This product is also situated at the lower end of the price range, whereby the difference must be made between the application and the maps, that is, the maps and routes are pre-calculated on a PC and then transferred onto the PDA running the routing software. It must be assumed that the map sections will be separately marketed in the future.
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Mobile Navigation: PDA navigation systems are currently available on the market. GPS and localisation modules provide a turn-by-turn navigation for the user. A similar level of quality to the on-board navigation can be achieved here. Through the mobile network these systems also load a map section from a central server to the PDA on which an application routes independently. Due to the large amounts of data the provision of map sections to the mobile device is only possible to a very limited extend. UMTS will provide a suitable bandwidth for data transfer. However, the transfer costs can still be considered as too high for a normal consumer, which reduces the attractiveness of such a service enormously. On-board navigation: On-board navigation is currently the benchmark navigation solution in vehicles. The current development in this area is demonstrated by the fact that the systems can be accessed on-line, i.e. here both traffic conditions and travel information can be transferred to the client dynamically via mobile network. Off-board navigation: The idea of the off-board navigation system has been around for some years. First services are specified in the GATS (Global Automotive Telematics Standard) from the year 1998. Looking at the last 4 years, no solutions at all were available at the start as no end devices were available to support the GATS. The situation first changed with the introduction of the first PDAs to the market which were compatible with Windows CE. They form a suitable platform for implementing a client-software for the off-board navigation. The future market development will be influenced by a number of devices including 3G (3rd Generation Mobile Networks). First off-board navigation systems are already on the market. According to the market analysts from Durlacher (2000) the U.S. is the world leader in regards to Internet adoption and eCommerce. In comparison, however, the mobile sector falls behind that of Europe and Japan. The main reason can be seen in the difficulties of network coverage and many different standards, differing from region to region. UMTS licence auctions are believed to be held in the second half of 2002 but can also be postponed as agreements on the sharing of frequencies still do not exist (Teltarif, 2001). Another fact which complicates the situation in the U.S. mobile market is the existing billing system: Both, the caller and the recipient have to pay for the connection. Thus many customers in previous years just switched their devices off in order to save money. Therefore the UMTS principle of being “always on” did not apply. This might also be one reason why the market for PDA’s in the U.S. is still bigger than the one for mobile phones. The short message service (SMS), that became by far the most popular mobile service in Europe is lacking acceptance in the USA due to the fact that the new services, which were only
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recently introduced do not allow short messages to be sent between the different provider’s networks. People who use SMS are still restricted to one provider, although this constraint is now gradually vanishing. As mentioned in the first paragraph the U.S. is a world leader in the number of fixed Internet subscriptions. This is one reason why this market is considered valuable by the Durlacher (2000) analysts. For example, NTT DoCoMo from Japan (iMode) has owned 16% of AT&T Wireless Group since recently. (Why is this important?) According to KPMG (2001) the market of mobile audio devices in the U.S. will reach 90 million units in 2005. In Australia the two major players are Telstra and C&W OPTUS. They occupy 90% and 6% of the local access market, respectively (Bis Shrapnel, 2001). According to analysts form BCG (2000) the following figures can be expected for the Australian B2B market: Transaction values will increase from an estimated $17 billion in 2000 to $235 billion by 2005. By 2005, 22% of all transactions between businesses in Australia will be online. Financial services and the logistics industry are likely to be early adopters. Enablers such as trusts and payments are vital to B2B eCommerce. The Japanese iMode Service can be seen as an example for the successful integration of different market players under one brand, although there was the advantage of the strong market position of NTT DoCoMo. iMode was introduced to the European countries during the last year in co-operation with ePlus. It is still highly questionable whether this service will be as successful in Europe as it is in Japan (18 million subscribers in 2001). The main reason for this is the fact that customers in Japan were already accustomed to mobile services from the start. Fixed Internet connections never gained the kind of popularity they have in Europe or the United States. In the first years of mobile networks in Japan NTT DoCoMo already possessed such a strong market position, that it was able for mobile operators to dictate terminal specifications to handset manufacturers (for example screen size, iMode Button). Application developers were forced to adopt guidelines introduced by the market leader, who was then able to provide 70 different services by the launch of iMode. As similar strong competitors such as the au Group, J-Phone Group and TU-KA Group start to appear on the Japanese market (Table 1), NTT DoCoMo can profit from very strong contractual agreements with other companies, such as developers, content providers and device manufacturers. According to the analysts from Durlacher the following are the key success factors for the Japanese mobile market:
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Table 1. Comparison of Japan’s Mobile Data Services. i-Mode
Ezweb
J-Sky
Company Markup language Microbrowser IMAGE formats Handset display colour capability E-mail length for sending E-mail length for receiving E-mail attachments Current network
NTT DoCoMo CHTML Compact netfront GIF 256
KDD/au-Group HDML (WAP) EZ browser BMP/PNG 256
J-Phone MML Proprietary PNG/JPEG 256
500 500 None Packed-switched
6000 6000 IMAGEs/melodies Circuite-switched
Speed (Bps.)
9600 (28 kb on DoPa)
3G Standard 3G Launch
W-CDMA May 2001
510 4000 IMAGEs/melodies Circuite- and packed switched 9600 (6400 on cdmaOne) CDMA2000 Second half 2002
9600 W-CDMA Q4 2001
Packed-based networks provide always-on connectivity which provides customers with the benefits of immediacy; speeds with 9.6 kbps are comparatively low, but applications are very useful; the prices for services are low. iMode customers may pay up to 3 Euro per month for a service channel. Users can also be charged by byte, whereas the price per byte is low, and many services are free of charge; low-usage of fixed line Internet access; applications messaging, ringing tones and wallpaper downloads attract the youth, who are considered a very profitable group of customers.
3. TECHNOLOGY AND SERVICE TRENDS The market for mobile communication is becoming more complex by the day. Not only is the number of players steadily increasing, but also the number of market segments which are covered by new technologies. Introducing IPv6 (Internet Protocol Version 6) will even intensify this development. Former data and communication-only networks will have to deal with warming up cars, fridges that prepare the shopping list or TV sets which want to know what they should do in the evening. All devices which are part of any kind of communication network will be identified by their IP address, thus enormously extending the market for application developers, service providers, content providers, device manufacturers and operators. Any device in a network with an IP address could theoretically
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be contacted from anywhere and involved in some kind of communication. For example the preparation of a journey could be done by a mobile agent who visits all necessary databases autonomously, just triggered by a user. However, the introduction of the IPv6 standard into the market is currently lacking acceptance by address providers and device manufacturers due to the still high amount of conventional address space (IPv4) available in the Internet. An exception are the Asian regions in which providers and manufacturers are already running out of free address space (Heise Online, 2003a, b). The obvious tendency for integrating services and the trend to co-operations between content, service, and network providers will require the implementation of intelligent and open interfaces as it is increasingly realised in XML (Extensible Markup Language) and SOAP (Simple Object Access Protocol) technology. The latter one is known these days mostly because it is already one step ahead of pure XML and promising for the task of inter-connecting the services and content of different market players with easy means. This so called “Web services” are based on a client – server architecture which is supported by both, Sun (Java) and Microsoft (.NET). Any party that wants to make use of the Web services of another company just has to implement the client-side part in it’s system architecture by adopting the functions and data structure that is described in the automatically generated Web Services Description Language (WSDL) file. Thus, one could assume, that Web services should also support mobile end devices such as PDA’s directly. In fact, Microsoft has announced to introduce a development kit for mobile devices during this year. The current market developments, however, show that the two competitors more and more drift apart. One the one hand there are Sun and Oracle which support the W3C efforts for a standard, and on the other hand there are Microsoft, IBM and SAP who try promote their own developments (Business Process Execution Language for Web Services, BPEL4WS) (Heise Online, 2003a, b). The idea is to make all available Web services public in a web directory, the Universal Description, Discovery and Integration (UDDI), thus enabling all interested parties to easily find and connect to the desired services. In this context UDDI is also a platform to present ones own company and it’s Web services. In addition to this development it can be also surveyed that there will be intelligent and mobile agents, which are able to perform self-triggered, autonomous and personalised interactions between different services and their content. More standards, better development kits and many EU funded projects in this area indicate, that this technology will play a major role in the future infomobility market. As cell-based positioning is too inaccurate for navigation it can be expected that in the future most handheld devices will be equipped with a GPS or GALILEO receiver (Spatial, 2002). Or at least there will be a mixture of cell-based and
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satellite navigation. It seems that GPS will be introduced more and more in mobile phones, PDAs and even watches. Garmin is launching its NavTalk II phone soon and thus starting to compete with Benefon. SiRF Technology is forming an alliance with Motorola for the integration of SiRF’s GPS technology into its iDEN (Integrated Digital Enhanced Network) family of digital wireless phones. In addition Sony Ericsson is introducing their T206 in the autumn 2002 featuring GPS for emergency and location-bases services. In addition to these GPS phones, there is a range of GPS add-ons for standard mobile phones. In the USA Airbiquity is providing an add-on for Nokia phones. Chapman technologies is developing its GPS add-on for Ericsson’s new T60c mobile phone. The updated Nokia Communicator 9210i and the Nokia 7650 Smart Phone are already available in Europe and in Asia. This will move the Nokia Communicator into a new phase. All these developments taken together will encourage mobile operators to consider evolutionary path for positioning technology. The GPS handsets are becoming very interesting for European mobile operators. Many of them are interested to know, whether it would be preferable to implement GPS technology straight after the cell-ID stage. This would make E-OTD technology redundant (Enhanced Observed Time Difference). In practice several operators will adopt “wait-and-see” policy until the market situation is clarified. Whatever the fate of E-OTD technology, the future is bright for the “middleware” and location-based application vendors. Middleware technology is designed to interface with any positioning technology, whether it is network based or handset-based. LBS (Location Based Services) application vendors are similarly well placed. It is also very important to not focus on UMTS alone. Wireless LAN could be a major competitor to UMTS networks and has the advantage that it is already available today and normally needs the telecom operator only for the connection to the Internet. The connection speed is not comparable to UMTS. New developments such as the 802.11a standard in the U.S. will provide up to 56 MBit/s whereas already today 11 MBit/s are possible (Heise Online, 2002a, b, c). Some analysts therefore believe, that there will be a market split. UMTS and 2-way satellite communication will be used to cover larger and global distances, whereas WLAN and Bluetooth (Micro- and Pico-Cell) will be used for local area networks (LAN), for example in cafes or office blocks. In fact, it is much more likely that a mixture of different communication channels will emerge comprising the different technologies WLAN, UMTS, Bluetooth and two-way satellite communication. In the U.S. it is expected that WLAN will lead the market due to a lack of standards among mobile operators. Until 2006 it is expected that about 20 million people will use WLAN in Europe (Heise Online, 2002a, b, c). Another issue of no less importance than bandwidth will be the security of dynamic or static private user data. Especially while depending on user profiles
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Fig. 2. End to End Security. Source: (Durlacher, 2000).
for providing an attractive service it is most vital to be able to guarantee security of private user data from the beginning and on all levels of communication (end to end). The struggle and common rejection of previous mobile services, especially those with mobile payment functionality, is due to the fact that up to today the question of the security of user data is not taken seriously enough by most service providers. The efforts of different governments after the 11th September to weaken data protection legislation may lead to a further slow down of the market development as soon as end users gain first experiences with this new situation. Experts estimate, that about 80% of all potential online payers do not complete their purchases due to insecure systems and incompatible standards (Heise Online, 2002a, b, c). A solution would be to implement an end to end security model as shown in Fig. 2. Private user data will be securely transmitted between the end devices, gateways and servers. Market segments in which functioning mobile applications and services already exist can be found in the B2B sector, such as automotive and logistics. The disadvantage is that these solutions are normally restricted to relatively inflexible company networks (Intranet). The sixth framework programme of the European Commission is prepared to spend billions of Euro in order to harmonise the market by funding all kinds of interdisciplinary projects and developments, such as OPIUM (Open Platform for Integration of UMTS Middleware) and RUI253 (Recommendations for Internet Usage on 2.5 and 3G). This leads to another sector within the area of infomobility services: Navigation systems. Navigation systems more and more develop to guidance systems, that is, information systems along the route. Information can be filtered with regards to the route ahead and provided in time to the driver. This trend will continue and the (on-board) navigation system becomes more and more embedded in an multi purpose in-car information platform (e.g. with data exchange with a PDA). The
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integration with other services (beyond today’s emergency services) will continue. As in other areas, the client-server approach used for off-board navigation will be useful to link different services and content layers at the service centre instead of overburdening the in-car system. Hybrid navigation – the blending of on-board and off-board information sources to provide the navigation service – is another development strand in this area. The opportunities to supplement and update the information base on-board are numerous and are likely to materialise in the coming years. The same goes for the so called Advanced Driver Assistance Systems (ADAS) which promise to increase safety significantly in the future. Certain systems in this group require data mapped with high precision onto a digital map. The map data base and the localisation provided by the navigation systems is likely to be one component which will be used by these systems, e.g. to provide speed limit information in time or to warn of over-speed in relation to certain road conditions. Off-board and hybrid navigation also pave the way for another type of navigation service: Pedestrian Guidance Systems. Mainly two facts in technology development make this service attractive. On the one hand there are the advanced capabilities of smart phones (e.g. integrated GPS, large colour display) and on the other there is the client – server based architecture of modern navigation systems (calculations on a central server and the results are transmitted to the client device). Why shouldn’t such systems also guide pedestrians or cyclists? Voice guidance and very detailed city maps could become essential for future mobile tourism and traveller services.
4. MARKET SIZE 4.1. Telecommunications Market The emerging new technologies and services in mobile communications will offer new business opportunities: the change from voice communication towards mobile multimedia (mobile contents). The users are interested in new services if/when they are just reasonably priced. This development will affect a great deal of businesses related to mobile service provision, since they will be enormously multiplied thanks to new multimedia terminals, agent technology and possibilities to differentiate between the simple Internet access and the added value services. The revenue from location based services is not expected to be very high as shown in Fig. 3. This fact will lead to a market consolidation in which only the players who are able to provide attractive content and services will survive. This trend can already be observed today (OTS, 2002).
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Fig. 3. World Wide Revenues.
According to the outcomes of the IMAGE market survey the acceptance of new generation mobile services by a relevant number of users can be expected around the year 2005. By this time the number of mobile subscribers will also exceed the number of fixed wire-line subscribers. This is due to the fact that wireless networks and devices will not be sophisticated enough for mobile communication and other attractive mobile services of the 3rd generation before this time. As shown in Fig. 4 the most attractive offers to the consumer after the year 2005
Fig. 4. World-Wide Subscriptions to Selected Services.
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Fig. 5. Total Mobile eCommerce Revenues.
will be normal voice services, location based services, applications for mobile business (B2B) and services in the area of travel and tourism. The precondition for all these services will be a high bandwidth for the transfer of geographic data, as well strong graphics capability. The demand for location based and tracking services will increase, but it is difficult to estimate the future revenues for these services. It is expected that the demand will increase more then the revenue for these services. Based on the fact, that 30% of all eCommerce revenues will be provided by B2B relationships, there is a good reason for IMAGE to concentrate on this market (Fig. 5). 4.2. Automotive Market In the following, a market penetration scenario for navigation systems is presented based on statistics of the vehicle and navigation market and their projections. Figure 6 shows the growth of the navigation market during the last seven years. Today the high-end vehicles are already outfitted with navigation systems. The development shows that the products are accepted by the customers. However, the entry in the lower vehicle classes needs cheaper solutions. The off-board navigation offers the biggest potential in this case. The market situation for car navigation systems is structured according to different car classes (ACEA: EU, 2001): upper classes: including upper-middle, and executive cars. The estimated market share (new cars) is 33%. It will not increase significantly over the next 10 years,
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Fig. 6. Total Navigation Market 2001.
but the absolute number of new cars is sizeable. Therefore the number of upper class cars will be approximately 5 million in 2003 and 5.5 million in 2010. lower classes: lower-middle class and small cars. Corresponding to the number of upper class cars the estimated market share is 67%. Therefore the number of lower class cars will be approximately 10 million in 2003 and 11.5 million in 2010. OEM navigation system sales are modelled with typical S-shaped penetration curves. It is assumed that navigation systems in general have similar time-spans for market penetration as other in-car equipment. This time span is generally 8–12 years, once a technology starts to enter niche markets (e.g. luxury vehicles). Figure 7 shows the growth of the OEM Navigation market over the next ten years. The estimation reflects the result of a European market study (Commerzbank, 2001) and projections by the consortium. For the upper classes a point-to-point communication channel is considered standard equipment. For transparency, navigation systems are split into on-board and off-board navigation systems, although this distinction is expected to vanish in the future (“hybrid navigation”). On-board systems will further develop and their technological trends (towards hybrid systems and their integration in larger service and telematics packages) are geared by the high-end market. With some delay, the on-board technology
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Fig. 7. Market Expansion of Navigation Systems.
will popularise and also penetrate lower price segments (i.e. become equipment in smaller cars). Off-board systems represent the market segment of navigation technologies where investment cost is much lower, hence they are expected to penetrate first in the lower class cars. Off-board systems are also expected to develop significantly towards hybrid approaches, but their penetration in the upper class cars is expected later and more slowly. Especially the introduction of advanced telematics platform will push the off-board navigation in the upper middle class. For both systems, the OEM market and the aftermarket are considered. While new cars are the target market for OEM navigation systems, the vehicles with less than 2 years (and without and OEM navigation system) are considered the target Table 2. Penetration Rates of Navigation Systems in Different Vehicle Systems. Year
2003 2004 2005 2006 2007 2008 2009 2010 a Relative b Relative
OEM Upper Classa
OEM Lower Classa
After Marketb
On-Board (%)
Off-Board (%)
On-Board (%)
Off-Board (%)
Off-Board (%)
28.0 35.0 42.0 50.0 60.0 68.0 74.0 80.0
0.0 0.0 1.5 2.7 3.5 5.0 7.0 9.0
0.0 0.0 1.0 2.0 4.0 7.0 10.0 13.0
1.5 5.5 9.0 12.5 16.0 19.5 23.0 27.0
1.7 1.9 2.0 2.3 2.7 3.7 5.1 6.5
to annual new car sales in the segment. to all cars less than two years old without navigation.
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Fig. 8. Penetration of Off-Board Navigation.
to aftermarket products. The aftermarket production is linked by an assumed rate to the OEM sales. Table 2 shows the estimated penetration rate considering both the two defined car classes and the after market. Through a fleet-turnover calculation – the active stock of navigation systems in the fleet are those sold during the last 6 years – we estimate the fleet penetration with navigation systems considering market and sales figures and projections (Commerzbank, 2001). The result of this calculation is shown in Fig. 8. To compare the estimated penetration rate of the off-board navigation in the automotive sector with the estimated subscriber in the telecommunication sector the cumulative figures in 2005 are decisive. In this year about 2.000.000 OEM and 1.500.000 after market user are expected. In total we will have 3.500.000 off-board units linked to a car.
5. CONCLUSIONS Today it can be said that the market of mobile communication services is occupied by two major types of players: Telecommunication and automotive companies. Up to today both market players try to offer similar services to their customers, but with a different lobby standing behind them. It is only a question of time until this possibility of differentiation will vanish. Public authorities as high potential content providers more and more co-operate with service providers as they begin to realise the advantages of mobile services especially in the tourism and travel sector.
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5.1. The Telecommunication Sector According to the outcomes of this market survey the acceptance of new generation mobile services by a relevant number of users can be expected around the year 2005. By 2005, the number of mobile subscribers will also exceed the number of fixed wire-line subscribers. This is due to the fact that wireless networks and devices will not be sophisticated enough for mobile communication and other attractive mobile services of the 3rd generation before this time. Taking a certain error ratio among the market analysts into account it can be said that the most attractive offers to the consumer after the year 2005 will be normal voice services, location based services, applications for mobile workforces (B2B) and services in the area of travel and tourism. The precondition for all these services will be a high bandwidth for the transfer of geographic data, which give a service most of its attractiveness as well as other graphics capabilities. The demand for location based and tracking services will increase, but it is difficult to estimate the future revenues for these services. It is to be expected that the demand will increase more then the revenue for these services. Another issue with no less importance than bandwidth will be the security of dynamic or static private user data. Especially while depending on user profiles for providing an attractive service it is most vital for any kind of project to be able to guarantee security of private user data from the beginning and on all levels of communication. The struggle and common rejection of previous mobile services, especially those with mobile payment functionality, is due to the fact, that up to today the question of the security of user data is not taken seriously enough by most service providers. Experts estimate, that about 80% of all potential online players do not complete their purchases due to fear of insecure systems and incompatible standards (Heise Online, 2002a, b, c). Vodafone has just recently started a new m-payment initiative (“m-pay”) which is thought to be introduced in almost all over Europe (Mobiforum, 2002). The goal is to enhance the mobile phone with payment functionality (3G Mobile, 2002). Another point which fits in this area is the use of user profiles within a communication platform such as IMAGE. As soon as users lose control over their data they will very quickly start opposing mobile services of any kind. For example they may not be able to refuse mobile advertising because it automatically appears on their devices, or because they receive advertisement after their profiles were sold to an unauthorised party. Up until today it has been highly questionable as to whether UMTS will be such a success as it is still predicted by many analysts. One major obstacle is the high implementation costs of the network and a lack in end devices. In fact, it is much more likely that a mixture of different communication channels will emerge
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such as Wireless LAN (which has a very high potential for success due to its low implementation costs), UMTS, Bluetooth and two-way satellite communication. Until 2006 it is expected that about 20 million people will use WLAN in Europe (Heise Online, 2002a, b, c).
5.2. The Automotive Sector The automotive and telematics sector is also highly affected by the ups and downs of the mobile services market. More and more automobile manufacturers already offer or at least plan to provide their customers with high end mobile services. Those services are mainly located in the area of navigation, location based services and tourism. Former on board navigation systems which were strongly bound to the car are now becoming more and more mobile. They are now highly integrated, multi functional service stations which offer to the driver, for example, POI (Point of Interest) along a route according to the drivers user profile, dynamic routing capabilities by integrating dynamic traffic data into the route calculation and an enormous flexibility because the devices could be smart phones in future, which get their route calculation online. The cost situation, at least in many countries within Europe, meanwhile exceeded the bandwidth as an obstacle for the broad introduction of such services. For a normal everyday customer they are simply to expensive, which leads to the situation that they are (if at all) only implemented in upper class cars. As long as hardware and connection costs do not represent an acceptable cost benefit relationship to the end user, they will remain in a niche sector.
REFERENCES 3G Mobile (2002, January). Vodafone starts testing mobile-wallet initiative. Newsletter Volume 4. ACEA: EU (2001). Sales and fleet statistics of passenger vehicles, www.acea.org. Andersen, A. (2001). mCommerce – More hype than substance? Financial Services, 1(01). Bis Shrapnel (2001). Telecommunications infrastructures in Australia 2001. Research Report prepared for the Australian Competition and Consumer Commission (ACCC). Commerzbank (2001, May 9). Europ¨aische telematik-industrie – Open road ahead. Durlacher (1999). Mobile commerce report. Durlacher Research Ltd. Durlacher (2000). UMTS report. An investment perspective. Durlacher Research Ltd. Heise Online (2002a, March 7). Vielfalt an bezahlsystemen bremst eCommerce. Heise Online (2002b, March 9). Auch Briten wollen WLAN-hotspots. Heise Online (2002c, April 22). Funk-LAN: Schneller und kompatibel. Heise Online (2003a, April 17). Web Services konkurrieren nicht – nur ihre Standards. Heise Online (2003b, April 18). (IPv6-) Wunder dauern etwas l¨anger.
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KPMG (2001, November). Billing trends in communications industry – U.S. focus. Presentation of John Perkins, KPMG Consulting. Mobiforum (2002, September 20). “Vodafone m-pay”: At last, mobile payment without registration. MobiFourm Newsletter. OTS Newsletter (2002, January 14). Drahtlos surfen in der Wiener Innenstadt. Newsletter. Spatial Newsletter (2002, February 28). Trimble and ESRI Form strategic alliance for mobile GIS solutions. Newsletter. Teltarif. http://www.teltarif.de/arch/2001/kw36/s6099.html.