Connected Car is Probably the Best Vertical for Incremental Mobile Connections

The coming Internet of Things both illustrates the financial upside for many participants and the potential issues for Internet service providers. IoT, most assume, will eventually be very big.

In the 1990s, one billion people connected to the Internet with desktop computers and laptops. In the first decade of the 21st century, two billion people connected to the Internet with mobile phones.

By 2015, according to Cisco Systems, 25 billion things will be connected to the Internet, and to each other. Perhaps five years after that, in 2020, the number of connected things might double to 50 billion.

The issue is whether IoT also will produce big revenue opportunities for ISPs. Much depends on how the things get connected. If every automobile represents at $10 a month incremental mobile subscription, a sizable revenue stream could be generated.

If most of those cars connect using consumers’ existing smartphones, maybe less incremental revenue is generated. Other IoT devices might connect primarily using unlicensed spectrum, though, generating no direct incremental revenue.

In-home IoT sensors likely will use Wi-Fi. Other connected things might rely on Bluetooth or other short-range connection methods that likewise do not generate direct incremental revenue for an ISP or mobile service provider.

Of the enabling developments, one potentially worrisome issue for Internet service providers is that IoT will hinge on “cheap bandwidth” and “cheap sensors,” as well as ubiquitous Wi-Fi coverage usable “for free or at very low cost.”

Sensor prices have dropped more than 100 percent over the past decade, to an average of 60 cents. Processing costs have declined by nearly 60 times over the past 10 years.

The cost of bandwidth has declined by a factor of nearly 40 times over the past 10 years. That, in conjunction with affordable sensors, makes IoT feasible. But “cheap bandwidth” also suggests low connectivity revenue for ISPs and mobile service providers.

But big data is a directly intertwined opportunity as the IoT will generate huge amounts of unstructured data.

Automobile connectivity is one industry vertical where mobile networks should be the mainstay, however.

By some estimates, by 2018, half of all cars sold will have Long Term Evolution, 3G or Wi-Fi capability.  Audi Connect is one such program.

Audi is offering the first-ever in-vehicle 4G LTE data connection in North America. The data plans will be competitively priced, starting at $99 for a six-month plan and $499 for a 30-month plan.

The six-month plan comes with 5 Gigabytes of data usage. The 30-month plan supplies 30 GB.

AT&T has at least eight connected-car contracts, with Nissan (Leaf), BMW, Ford Motor Co., General Motors (OnStar), Tesla, Audi (A3 and Q3), Volvo and GM's operations in Europe.

Verizon’s Hughes Telematics acquisition in 2012 gave the telco an established vehicle information technology business, which in 2011 produced $71 million worth of revenue and a contract with Mercedes Benz.

AT&T has identified services for the connected car as including advanced diagnostics, family tracking, enhanced safe driving via telematics, ability to remotely warm, find one’s car in a parking lot or open locked doors, voice recognition for hands-free driving, automotive app stores, vehicle updates of firmware, rear seat entertainment and connected media.