Telematics
– or machine-to-machine communication (M2M) as it is also known – refers to
automated information exchange via a wireless connection between two or more
machines, without any human involvement.
Telematics can be used in order to transfer measurement data and environmental variables from a mobile unit or sensor, for example in a vehicle, to a central point. The purpose may be to compile information about fuel consumption, determine a geographical position or check a distance travelled. If the mobile unit is installed in a building, telematics can be used to remotely read an electricity meter, for instance.
From the corporate economic perspective, there are several advantages with telematics, but most stakeholders that develop telematic solutions are oriented towards saving costs within existing operations.
By
automating the flow of information and incorporating telematic
solutions, productivity gains are made through the existing processes being
made more efficient. Thanks to improved access to information, it is possible
to use resources in a more efficient way through the telematic
solutions reducing uncertainty and overall delivering lower search and
transaction costs. For example, it is possible to rectify problems that arise
quicker if the information comes automatically. In a corresponding way it is
not necessary to perform any service or control measures before a need has been
observed.
The
introduction of telematics imposes great demands on
integration, and therefore these solutions are normally developed in
cooperation with the customer. This means that the relationship between the telematic stakeholder and the customer in many respects is
in the nature of a partnership rather than a traditional buy-sell relationship.
Generally, it appears that there is a need to be able to position and monitor most things that have a value. Therefore, there is great potential for innovation in the use and development of telematics. In pace with more products being supplied with wireless connections, this will probably create new business opportunities and completely new business areas based on telematic solutions.
Globally, there are a number of different technologies available that can be used for telematic connections. These connections have many similarities and are often based on for instance, conventional radio technology, but they also distinguish themselves as they allow variable transmission capacity and range. The technologies for telematics that are offered in the market today also vary a great deal as regards operating costs.
Two consultancy firms oriented towards IT and telecom, Harbor Research and ABI Research, estimate that in 2009 there will be 100 million units supplied for telematics (including sensors).[17] Thus there is already today a rather large and established world market. ABI Research also considers that at present there are about 71 million machines that are connected via mobile networks. The main part of these machines (over 70 per cent) in Europe use GSM networks, while connections using CDMA are most common in Asia.
The choice of GSM networks in Europe results from the good coverage of the technology making it rather cost-effective compared with other established technologies in the market, such as UMTS. At present very small volumes of data are actually transmitted via the networks with the aid of telematic solutions,[18] and the data packets in many cases also need to be transmitted long distances to a central point.
Berg Insight, a consultancy firm oriented towards the telecom market, estimates that in Europe in 2009 there will be over 14 million SIM cards that are intended for telematics-based connections. According to this firm, this represents an increase of about 2 million cards over a half-year, which indicates that the market is expanding rapidly. However, a comparison shows that telematics still comprise a marginal part of the total mobile market in most countries. Berg Insight points out at the same time that Sweden in this respect differs as regards the number of subscriptions, as it is estimated that over 10 per cent of all active SIM cards are already intended for telematics.[19] This provides Sweden with a high ranking as regards use and development of telematics.
Table B Proportion of telematics-adapted SIM cards of the total number of SIM cards in use, 2009
|
(per cent) |
Country |
|
> 10 |
Sweden |
|
> 5 |
Finland |
|
> 2 |
Denmark |
|
< 2 |
Germany, the United Kingdom, Italy, France |
Source: Berg Insight, 2008
Today, several of the major telecom operators are in the global market for wireless telematic solutions, such as T-mobile (in cooperation with Wyless) and Orange. Most offer a number of products that are based on tested technological platforms, in mainly GPRS connection via GSM networks and advanced use of text messages (SMS). In recent times, more operators have also increased their ambitions in this area and, in the beginning of 2009, Vodafone for instance launched a new kind of specially adapted SIM card, new roaming contracts and a number of new telematics-adapted services.[20]
Information
gathered by PTS shows that the number of telematic
subscriptions increased by almost 30 per cent during the second half-year of
2008, from 1.2 to 1.6 million. There are a handful of national stakeholders in
the Swedish market, and amongst these Wireless Maingate,
TeliaSonera and Telenor are
the tone setters.
Wireless Maingate is a Swedish-based company that has specialised in
telematic solutions. This company has been active in
the market for more than 10 years and today has about 24 employees and sales of
just under SEK 72m. Telenor itself states that they
have worked with telematic issues since at least
2005, [21] but during 2008 the company decided
to reinforce its investment in this area by creating the separate company Telenor Connexion. The new company has sales of about SEK
200m[22] and about 10 employees. As regards TeliaSonera’s work within telematics,
the company states that they established themselves in this area in 2001,
primarily through joint development projects within the automotive industry.
Today, TeliaSonera has 15 to 20 employees who only
work with the logistics market, and according to them, sales have increased
greatly in this area in recent years.
If the
various companies are compared with each other, it becomes clear that they have
differences. Measured in the number of subscriptions, Telenor
is the largest, followed by TeliaSonera and Wireless Maingate. In contrast to TeliaSonera,
Telenor Connexion has to a large extent chosen to
orient itself towards the electricity market, primarily solutions for distance
reading of electricity meters. TeliaSonera has to a
greater extent invested in logistics services and the automotive industry.
These segments have had a lower rate of growth than the electricity market,
which has resulted in TeliaSonera having a lower
growth in subscriptions but higher revenue figures per subscription compared
with Telenor. TeliaSonera
is also a wholesaler of telematic subscriptions for
Wireless Maingate.[23] Wireless Maingate has however, like Telenor, given priority to the electricity market, which
today represents 60 to 70 per cent of the company’s sales.
Moreover, Wireless Maingate has a greater proportion of telematic subscriptions adapted to the security industry and sales terminals than TeliaSonera and Telenor, which results in higher sales per telematic subscription. During 2008, Wireless Maingate had almost twice the revenues per subscription compared with TeliaSonera and almost three times as much as Telenor Connexion.
The telematics market can be broken down into a business market, with improvements to process efficiency and a consumer market, which is characterised by, for instance electricity meters, vehicle tracking and alarm systems. However, as regards the consumer market, the operators and companies that develop telematic solutions do not usually refer to the end users. Instead they have to a large extent different partners who have integrated telematics as part of their other product range. This is, for instance, the case with Securitas, which offers alarms with wireless connection and Volvo Cars, which offers automatic positioning services in the case of, for instance, accidents.
Sweden is an important market for the telematic solutions that have been launched by, among others, Telenor Connexion, Wireless Maingate and TeliaSonera, but the telematics market is global. One important reason for this is that the companies that choose to invest in telematics often need solutions that can function regardless of geographic location. This is particularly important for the automotive sector and the logistics sector, but also for businesses that provide security solutions and energy transfer. Several companies that have based their business concept around automatic sales (Point-of-sale), for example parking companies and companies that offer beverage machines, also use telematics. There are also advantages here with not needing to take into consideration national borders.[24]
Moreover, the insurance sector has also demonstrated great interest in telematics, not least as the technology could possibly contribute to reducing risks through providing better information about different insurance objects. There is also great potential for monitoring and controlling business-critical processes in base industries with the help of telematics.[25] The same also applies to health and medical services, where telematic solutions could possibly facilitate remote patient management.
The Swedish market is in many ways a reflection of the global market. The dominating telematics customers are vehicle manufacturers such as Volvo and Scania, and energy undertakings such as Vattenfall, E.ON, Swea Energi and Fortum. In the security market there is among others Securitas, and there is also a large and growing group of customers within the retail trade who use the telematics company BAB’s wireless payment terminals.
3.5 Future potential and challenges
The Swedish telematics market has grown rapidly in the course of last year, and it is reasonable to assume that the market will grow further in the future. Telenor forecasts, for instance, that it will have sales of over a billion kronor around 2012, which can be compared with a couple of million during 2005.[26]
Forces behind the current and expected growth are the development within the electronics area which have resulted in components for wireless connections becoming both smaller and less expensive, at the same time as changed rules within the Swedish electricity market have promoted an increase in demand for telematic solutions.[27] The current segment within telematics suggests that customers wish to have mobility, flexibility and security. This indicates it its turn that there is good market potential for telematic solutions, not least in Europe where mobile coverage is good at the same time as the operators have a great need for innovation in the telecom area in order to be able to retain their margins and their earnings capacity. Berg Insight estimates that in 2013 there will be scope for at least 600 million commercial telematics-based connections with applications within energy, vehicle, security and vending machine sales. However, there are different views on how rapidly the market will develop. ABI Research forecasts that globally there will be delivered upwards of 280 million modules intended for telematics during 2011, while Harbor Research predicts a more rapid growth of the market by 400 million units that year.
If investments reduce, this will probably slow down the transition to and development of telematics. This view is shared both by Berg Insight, which considers that 25 per cent of Europe’s 345 million electricity meters will be connected by 2013 – but that the rate of connection will thereafter increase greatly in pace with the effects of economies of scale and increased pressure by the public and politicians. The same also applies to motor vehicles. According to Berg Insight, there will be approximately 31 million telematics-based SIM cards in passenger cars in 2013.
As pointed out in the introduction, today the GSM networks are used for most telematic solutions in Sweden. According to Telenor’s calculation, it will take up to 2014 before we see any manifest transition to another technology, for example 3G networks. The possibility of using existing GSM networks for new applications of telematic solutions creates potential for the operators to increase revenues without very extensive investments in, for instance, capacity-enhancing measures. In this way, the sub-market telematics distinguishes itself from for instance the sub-market mobile broadband, which is another growing segment in the area of mobile call and data services.
However, considering the current commercial platforms for telematics are based on existing tested technology, it is remarkable how long a time it has taken for the telematics market to develop. One explanation may be that the transition to telematic services imposes great demands on integration, both within businesses and between businesses and customers, which can result in disruptions to routines, cultures and methods of working. The electronics and telecom sector has been characterised by established standards, but there are to a large extent no such standards within the area of telematics. This also means that work with implementation can be expensive, as solutions within new segments require tailor-made solutions for each customer’s individual needs. The good examples that have been produced may, in other words, not be transferred from one customer to another without individual readjustment and adaptation.
There is also a challenge that affects various technical solutions and the need of, for instance, multiple antennae to be able to achieve cost-effective transfer and transmission regardless of geographical position (for instance a coverage problem) and the access technologies available. The latter is particularly important when telematic solutions are to be used for mobile units. Currently, extensive research is in progress concerning software-based radio (Software Defined Radio – SDR) which would make it possible for a radio unit to simulate hardware components and thereby change between different standards and frequencies. However, progress to date has been limited.
Yet a further challenge for the telematics market lies in integration issues and the security that must surround data collection. Information from machines, buildings and vehicles that is gathered by telematic connections could possibly be linked to specific stakeholders (companies or private individuals) if such data is run jointly, which could potentially threaten both personal privacy and business secrecy.
[17] Information quoted from The Economist, ‘The hidden revolution’, 28 April 2007.
[18] Telenor Connexion, which offers telematic solutions in Sweden, estimates that a telematics-adapted subscription does not use more than 0.25 Mbyte in data traffic per month.
[19] Berg Insight, ‘The European Wireless M2M market’, 2008. Telematic subscriptions are reported separately in ‘The Swedish Telecommunications Market’, and are thus not included in the contract subscriptions and pre-paid cards reported in Table 15 .
[20]http://www.vodafone.com/start/media_relations/news/local_press_releases/germany/germany_press_release/vodafone_intensifies.html] 16 March 2009.
[21] At the turn of the year 2005/2006, Telenor took over Vodafone’s Swedish operations, which among other things included telematics. Vodafone had then worked with telematics since the end of the 1990s.
[22] Calculation presented in the Swedish newspaper Dagens Industri, 22 December 2008.
[23] Wireless Maingate does not own its own network, but uses TeliaSonera’s GSM network for its products.
[24] Through having a solution that suites most countries, it is for instance easier to lease vending machines for sporting events and conferences.
[25] One example is Alfa Laval, that has chosen a 3G solution to monitor a water purification system at its production facilities. See http://www.processnet.se/iuware.aspx?pageid=4216&ssoid=98559.
[26] Even if this represents an increase, telematics is still a rather small subset. Telenor’s other operations have sales of approximately SEK 110bn and employee 34 000 employees in 13 countries.
[27] In 2003, an amendment to the ‘metering ordinance’ in the Electricity Act was approved. This amendment entails an obligation for network owners to read electricity meters at customers at least once per month. Moreover, from and including 1 July 2009, all Swedish electricity customers shall be invoiced according to actual use, which gives an incentive to find cost-efficient reading possibilities. For more information, see Government Bill. 2002/03:85, Committee on Industry and Trade Report 2002/03:NU11.