Telematics and Connected Vehicles Mike Peterson LFM 94

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

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

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

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

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

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

There is a significant market opportunity for telematics, if done right. • Wireless use is growing – US wireless industry is $80 B (WSJ 7/28/03) – 30 M US households will employ data networks by end of 2007 (Park Associates) – Intel’s Otellini predicts that 1. 5 B PC’s will have wired or wireless broadband connections by 2010 – Cable broadband services posting operating profits of ~60% (CIBC) • Consumers want to be more productive – Consumers pay $15 100/mth for cell phones & internet service providers – Average US citizen spends 541 hrs/yr driving in vehicles (1. 5 hrs/day) (NTPS) – 97 M people in the US spend at least 37 minutes commuting in their car every day. • Automotive industry is highly competitive; features and services which provide a lead are crucial to success Source: Erik Bue Telematics – 040109 LFM webcast. ppt 7

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

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

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

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

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

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

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

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

Competition among service providers is seldom oneto-one; each player has a slightly different offering. • OEM owned telematics service providers (On. Star) • Aftermarket devices (Lo. Jack, Network. Car, Mobile Guardian) • Independent telematics providers – retail (ATX, Cross Country) • Independent telematics providers – fleet (Qualcomm Omni. TRACS, @Road) • Voice portals (Tell. Me, Be. Vocal, Internet Speech, AOL By Phone) • Cell phone voice services (Verizon, Sprint) • Auto club services (AAA) 16 Telematics – 040109 LFM webcast. ppt

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

Finally, there a variety of wireless technologies that can be applied to telematics. • • Cell (Analog, CDMA, GSM; voice, data/SMS) Short range communications (Bluetooth) Medium range communications (802. 11) Satellite communications (Boeing Thuraya, XM Radio, Sirius) Issues in technology selection: • Level of ubiquity • Reliability of technology • Upgradability • Level of control over provider (multiple sourcing) 18 Telematics – 040109 LFM webcast. ppt

Challenges – Hardware/Technology • “Clockspeed” mismatch – Telematics services (1 6 months) – Consumer electronics (6 18 months) – Vehicle development process (3 5 years) – Vehicle ownership lifecycle (6 15 years) • Shifts in technology (analog digital) • Technology application (client vs. server) Challenges – Societal • Government regulation (FCC – E 911) • Interface with emergency service providers 19 Telematics – 040109 LFM webcast. ppt

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

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

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

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

Appendix – On. Star Overview

On. Star’s Beginnings 1996 2002 -3 Employees 18 436 Subscribers 1 2 M+ Hardware Phone 5 th Generation Services 8 15 Database 600 K 7 M 6 1, 000+ 1, 500 Dealers Factory Advisor Seats Distribution Brand Recognition 1% 90% 25 Telematics – 040109 LFM webcast. ppt

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

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

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

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