Mapping a Wireless Trend

GPS standbys Garmin and TomTom may need to change course if the popularity of in-phone navigation systems from the likes of TeleNav continues to grow

by Arik Hesseldahl

Greg Hughes can't afford to get lost. Hughes, 40, is a computer security consultant who logged about 150,000 miles flying to clients last year, and he typically rents a car to get from place to place once he lands. To find his way around, Hughes used to rely on dashboard-mounted navigation devices. But lately, he has ditched standalone navigators in favor of the mapping tools embedded right in his BlackBerry (RIM). "It's more convenient to have everything built into a single device," says Hughes, who's based in Portland, Ore. "I can use it when I travel for work or for personal travel. It makes the BlackBerry a lot more useful."

And potentially less expensive. Hughes pays about $10 a month for the service, provided by TeleNav, which delivers turn-by-turn directions, on-screen maps, and other travel-related information directly to cell phones and BlackBerry devices via AT&T's (T) wireless network. That works out to $240 over a two-year contract, which is less than the roughly $350 he would pay for a basic in-car navigation device. "It's also one less gadget to keep track of," says Hughes.

That's music to the ears of TeleNav, based in Sunnyvale, Calif., and Networks In Motion, based in Aliso Viejo, Calif., the two leading North American providers of navigation services over mobile phones. It's also a boon for wireless carriers including AT&T, Verizon Wireless, and Sprint Nextel (S), which have spent billions of dollars to create networks capable of delivering advanced data services.

What's In the Numbers?

Researchers at iSuppli estimate that of the 1.1 billion handsets sold this year, about 165 million, or 15%, will be able to run navigation services. That's up from 110 million navigation-ready cell phones sold last year. But if anyone's not rejoicing over the increased popularity of navigation via cell phones, it's probably companies such as Garmin (GRMN) and TomTom, which have generated billions of dollars from sales of standalone personal navigation devices (PNDs) and the dashboard-mounted navigators Hughes used to use.

Networks In Motion supplies navigation services to Verizon Wireless, a joint venture of Verizon Communications (VZ) and Vodafone (VOD), as well as to Alltel, U.S. Cellular (USM), and others. Networks In Motion Chief Executive Doug Antone says it took 15 months on the market to sign up 1 million subscribers, and that three months later the company is close to breaking the 2 million mark. Besides AT&T, the largest U.S. mobile-phone operator, TeleNav's partners include Sprint, T-Mobile (DT), and Alltel (AT). TeleNav Chief Executive H. P. Jin says his subscriber tally is greater than 2 million, but he won't say by how much.

Those numbers can mean higher average monthly revenue for wireless carriers. David Gill, an analyst at Telephia, says that of the $200 million spent this year by consumers on wireless location-based services, such as those that help parents keep track of their kids, 87% will be spent on navigation. "When you take out games and ringtones, which don't generate any recurring revenue after they're purchased, navigation stacks up quite well," Gill says.