Telematics made easy: complex behind the scenes, telematics must be kept simple to the consumer, argues OnStar chief

Automotive Industries, July, 2003 by John McCormick

Engaging and genial, the president of OnSta r Corp. is not the sort of person you would expect to have a war college degree under his belt. But prior to taking control of General Motors Corp.'s OnStar division in 1995, Chet Huber attended the National Defense University's Industrial College of the Armed Forces in Washington, D.C.

Nearly a decade later, Harvard MBA graduate Huber is likely finding his MS degree in national resource strategy useful in the rough and tumble world of telematics.

Defined by the Forrester Report as 'devices that wirelessly connect vehicles to customized information and services,' telematics has gone through a tough initiation in the automotive market. While GM's OnStar service has endured to become the big dog in the business with two million subscribers, other players, large and small, have fallen by the wayside. Most notable of the failures was Ford Motor Co.'s much anticipated Wingcast system, a joint venture with Qualcomm Inc., which was scrapped last year without ever going into operation.

Aside from OnStar, the other main provider to have survived the telematics shake-out is ATX Technologies. From his position, Huber sees maintaining a simple customer interface and stressing the safety features as the keys to successful evolution of the business. The perception of technical complexity is a turn-off to many consumers, argues Huber, who dislikes the word telematics for that very reason.

Countering critics who argue OnStar's business model is flawed, Huber says the numbers tell a different story Subscriber retentions (the number of people who renew their basic $16.95 per month service after the first free year) are running above 50 percent, higher than most analysts' figures. And as an indication of customer usage, OnStar offers the following statistics on monthly inter-actions: airbag notifications, 700; roadside assistance, 14,000; wireless connectivity, 12 million minutes/month (February, 2003); stolen vehicle location, 400; remote unlock, 27,000; convenience services, 289,000; emergency services, 6,000; route support, 220,000; remote diagnostics; 15,000.

One major achievement for OnStar is its adoption by a number of auto manufacturers other than GM. The list includes Audi, Volkswagen, Lexus and Acura, not to mention GM-allied brands, lsuzu and Subaru. In total, more than 60 vehicles on the market now come with OnStar.

So where does the telematics industry go now? Here, Huber answers that question and more.

Q. What have been your guiding tenets as you have developed OnStar?

A. We have tried to determine what consumers really want out of this technology. Early on, a lot of people talked about dancing holograms on the dashboard and all those kinds of technologies that make great press releases. But we quickly determined it wasn't about the technology. It was literally about being able to deliver a completely different approach to safety, security and peace of mind while you're in a vehicle.

Q. Why should auto-makers be interested in telematics?

A. Leveraging communications and connectivity technology with a vehicle platform is important because Americans spend 500 million hours a week in their cars. So you have a very large opportunity to interact with people and build a connection at a price point that delivers customers superior value for safety, security and peace of mind.

We did a lot of research on the question of whether telematics makes a difference, not just to people once they have it, but whether it makes a difference in buyers consideration set for a vehicle. The two big ways that the auto industry looks at this question are conquest and loyalty; how often will you keep the customer you already have and how often are you going to conquest another vehicle owner? Our research showed that with two identical vehicles, if one has OnStar you will see the conquest and loyalty rates go way up.

Q. What about the perception by some observers that telematics is mainly a luxury vehicle feature?

A. People thought it would only have a high income, luxury market appeal, but that's not the case. Our experience has shown the safety, security and peace of mind elements have very broad demographic appeal.

Q. In terms of technology what are the next steps in telematics?

A. I think everybody believes that over time there will be pervasive high speed wireless 3G network built out, although it may actually come in stages. There is also talk of wireless nodes in place where cars normally go, like gas stations, or roadside locations in high traffic density areas. So that while you fill up, your car would download two movies for the entertainment system.

In terms of building a real time database, that could happen automatically by collecting traffic information from the vehicles that are already out there. You have GPS in a car, and it can give location, direction and speed if you want to take it. So you could mine that data and paint a map with the flow rate of every main artery in the U.S. Things like that are not out of the question at all.