Cars Gone Wireless

Automakers and tech companies are adding a growing array of information and entertainment extras such as Web access in vehicles

Editor's note: The story has been corrected to show that J.D. Power expects 10.4 million cars, not 15 million cars, to be sold this year.

Ford is getting its geek on. Like other automakers, the U.S. carmaker has long outfitted cars with CD players, satellite radios, and navigation systems. But now, Ford also boasts Web access.

Starting in March, Ford (F) began offering Web access through an optional, $1,195 in-dash PC to buyers of some of its trucks, including the F-150 pickup. Aimed at small business owners such as contractors, the PC lets users surf the Web using the Opera browser on Sprint Nextel's (S) wireless network. "There's a need for productivity, a need for connectivity," says Ed Pleet, a product manager at Ford.

Other automakers, wireless service providers, and a host of companies hope to tap into that same need, equipping vehicles with a broadening array of high-tech services, such as Internet access and TV services. "One could see countless opportunities when you put Internet in the vehicle," Pleet says.

Autos Are Virgin Territory

Wireless service providers such as Sprint, AT&T (T), and Verizon Wireless face a largely saturated cell-phone service market where 90% of the U.S. population already owns a cell phone. But automobiles and other vehicles represent a vast, largely untapped market. "It's our next billion-dollar opportunity," says Jim Patterson, president of wholesale business at Sprint. There are 244 million cars registered in the U.S., and about 10 million new cars are expected to be sold in the U.S. this year, despite the recession, according to J.D. Power & Associates. Only a few tens of thousands of them have access to telecommunications services.

Why would the ailing auto industry introduce new, potentially costly in-car services during an economic slump? Carmakers increasingly view Web access and TV services as a way to differentiate their offerings and lure buyers from rivals. The availability of OnStar roadside assistance services has helped goose sales of Pontiacs and Chryslers in the past decade, experts say.

What's more, wireless network access is more widespread and affordable. In mid-April, TomTom will start selling its first wireless-connected navigation device, the TomTom GO 740 LIVE. The gadget uses the Jasper Wireless network to help customers look up local fuel prices and search for local businesses.

Training Teen Drivers

In August, Chrysler and Mercedes (DAI) cars will start carrying gear from Hughes Telematics that lets users call for roadside assistance and find out about bridge closures via Sirius XM's (SIRI) network. AT&T and Verizon Wireless will provide connectivity for the successor device, due for release in 2010.

Insurance companies are starting to push wireless connectivity in cars in a bid to reduce claims. In late 2007, American Family Insurance started offering DriveCam service at no charge to families with teen drivers. The service, which normally costs $899 the first year, aims to reduce risky driving by alerting users to potentially unsafe maneuvering, such as hard braking and swerving.

The device also captures video and audio of what was happening just before and after whatever triggers the alert and delivers the video over a wireless network so that it can be reviewed by the driver. "The insurance industry needs wireless in vehicles to produce a safer-driving public," says Patterson of Sprint, whose network conveys the video feed. "The adoption race in the insurance industry has exceeded our expectations."

Prices Dropping Fast

Prices of in-car services are dropping; some could even become available for free. DirecTV's (DTV) lineup of in-car TV channels from provider KVH (KVHI) costs $3,000 in equipment plus $5 a month in service fees to existing DirecTV subscribers. But in late 2009, companies including TV station owner Fox and cable operator Cox, both members of the Open Mobile Video Coalition, plan to offer an in-car service that lets users catch local TV broadcasts for free. "That's very competitive," says Mike Bergman, vice-president for new digital technologies at Kenwood USA, which has developed a prototype in-car receiver for this technology. "Nothing sells like the word 'free.'"

In large metro areas, consumers may be able to catch a dozen or more channels. And once equipment sales hit high volume, the price for related in-car equipment should drop to below $200, Bergman says. "It's becoming a lot less expensive to fit a car with the necessary hardware," says John Canali, an analyst with researcher Strategy Analytics. "It's only a matter of time before cars become connected to the Internet [and other services]."

In-car tech equipment has shrunk in size as well. This fall consumers will be able to buy a 1-inch tall external antenna from Audiovox (VOXX). Related gear will only be 40% bigger than your average cell phone and could easily fit into the glove compartment or under the seat. The $600 gadget will catch TV channels, like CNBC and Comedy Central, broadcast over Qualcomm's (QCOM) MediaFlo network. The service is expected to cost around $8 a month.

Better in the Car?

As prices fall, in-car video and other forms of entertainment will likely become more mainstream. "This is going to go from a specialty product to a mass-market consumer product," says Winston Guillory, president of RaySat Broadcasting, which, along with AT&T, will launch an in-car TV service, called AT&T CruiseCast, in May. Related hardware will cost $1,300, and service, which will stream 22 TV and 20 radio channels, should run around $28 a month. "It's inevitable, trying to have the same experience in the car as in the living room," Guillory says. "We all spend more time in our cars [than at home]."

Some tech companies hope in-car services may eventually replace other mobile and at-home telecommunications services. Take startup Autonet Mobile, whose equipment is now a factory option on some Chrysler, Dodge, Jeep, and Cadillac models. For $400 to $500 in hardware, and $29 a month in service fees, Autonet turns your car into a Wi-Fi access point that's accessible by in-home phones and laptops. The company, which has so far sold more than 4,000 units, including some to talk-show host Jay Leno, has seen 221% sequential growth in unit sales in the first quarter. "I think people are starting to understand the car is the next place for growth," says Sterling Pratz, CEO of Autonet.

In the future, in-car services could get even more interesting. On Mar. 26, Apple (AAPL) received a patent for a wireless-enabled in-car navigation system that can use information such as the angle at which the driver's fingers touch the display to cancel a route or to map directions home. Apple wouldn't comment on whether it's working on an in-car navigation system.

And a startup called ICO plans a slew of in-car services including TV, Web connectivity, and navigation that could be provided via its own satellite as well as wireless networks, such as that of service provider Clearwire (CLWR). "Car sales may be down, [but] people are still out and about," says David Zufall, a senior vice-president at ICO.

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High Tech Electronics

Wireless Communication

US Automakers

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