Will Car Phone History Apply to Connected Car?

By Gary Kim January 02, 2014

Just how big a market connected car services might provide for mobile service providers is not clear yet, though some surveys suggest it might be significant.

A consumer survey by Parks Associates has found that 33 percent of U.S. broadband households are “highly interested” in connected car features that include the ability to listen to online music and audio.

That should immediately raise at least some reasonable questions. Connected car audio services would have to compete with Sirius XM and methods of docking existing smart phones to car audio systems.

“One third of car owners, and over 50 percent of luxury car owners, now have connected car capabilities, and most of them use the features on at least a monthly basis,” said Jennifer Kent, Senior Analyst, Parks Associates. "The ability to play MP3 files on the car stereo is most common by far, but communication features such as the ability to listen to texts/email read aloud are becoming more popular.”

Only 16 percent of broadband households are “very interested in online video” features for passengers, but in both instances, interest skews strongly toward smartphone owners.

Much will depend on the way business deals are structured, creation of compelling new apps and, of course, the degree of end user demand.

History might suggest it will take a while for the market to reach appreciable size, because connected cars must first demonstrate clear value. One more Internet connection in a vehicle might be valuable to some.

There is one precedent: car phones. The value proposition was clear enough: “you can make and receive calls in your car.” At the time, that was about as differentiated a calling experience as a typical person could encounter.

But in the 1980s, when car phones were popular, relatively few people used a mobile phone. In fact, according to CTIA, in 1985 there were a total of 340,213 U.S. cell phone subscribers, and most of them were using car phones. That is, by today’s comparisons, not a mass market.

By 1996 there were about 44 million cell phones in use. By then, few car phones were used, though.

So you know the story: once cell phone service became cheap enough, people could use their mobiles for calling, and didn’t need a dedicated car phone anymore, much as people stopped using payphones.

That precedent shows how unpredictable connected car market might be. It isn’t clear whether dedicated vehicle Wi-Fi or Long Term Evolution connections will provide enough value to drive mass adoption, or, if so, if dedicated vehicle connections will be more popular than simply using mobile phones with personal hotspot connectivity.

Edited by Cassandra Tucker

Contributing Editor

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