Global Trend

Location-Based Technologies

When General Motors introduced OnStar in some of its Cadillac models in 1996, it was pioneering an industry known as location-based services ? or LBS. Because of the existence of global positioning satellites that can triangulate the position of a GPS transmitter anywhere in the world, GM had the idea that roadside assistance and other services could be delivered to drivers in their cars on a subscription basis.

If your car breaks down or some other emergency arises, you simply push a button, and someone comes out to help. OnStar can send in a report if your airbag is deployed or even unlock your doors remotely if you lock yourself out of the car. If you’re lost, it can provide you with directions to get you where you’re going. And that’s just the beginning.

During the past four decades, the U.S. Defense Department spent $14 billion to create the global positioning system. However, most of its uses have been in the private sector. Initially, the GPS handsets were used by outdoor buffs to find their way through rugged terrain. But they were quickly adopted for aircraft and marine navigation, and gradually trickled down to use in cars.

Now GPS is common and cheap. So cheap, in fact, that all cell phones have GPS installed as a safety device so that a user calling 911 can be located.

This policy began when the Federal Communications Commission ruled that wireless network operators had to provide emergency services with the location of mobile devices within 125 meters. The embedding of GPS technology in cell phones has led to the rapid growth of location-based services.

But what Americans have seen so far is just the beginning. The booming Asian market in cell phone-based LBS gives a hint of what’s to come. Asian cell phones can give users street-by-street directions. They can also tell them when a friend is nearby; the phones can be programmed to signal one another when they’re within a half-mile of each other.

KIDDI is such a service in Japan; it has 6 million subscribers. KIDDI includes 130 different location-based services, including EZ Navi Walk, which gives turn-by-turn directions.

American teenagers are bound to clamor for that service when it arrives here, and Nokia has started to edge into that market with its Mobile Search service that lets its cell phone users “search and find” businesses, such as restaurants. The phone then displays a full-color map to guide them there.

Sprint has introduced an end-to-end set of location-based services for finance, government, health care, education, manufacturing, and other businesses. Its services will do everything from tracking a company’s trucks to keeping high schoolers in touch with their parents.

LBS first came to market consciousness in late 1999. At that time, it generated a lot of press for new and exciting services. For example, two services were “Friend Locator” ? to find nearby friends ? and “Find My Nearest,” a service that would locate anything from an ATM to a McDonald’s within a user’s immediate vicinity. But the early systems weren’t very accurate at locating people or places, and the cell phone screens were too small. In addition, data transfer rates were slow. All in all, it was an awkward system, and LBS didn’t take off.

The big players, such as Hewlett-Packard, worked hard with the network companies to upgrade the systems to the level they’ve achieved today, and this means that the LBS industry is about to experience explosive growth.

Modified cell phones will be attached to shipping containers to enable high-accuracy tracking of high value goods from point to point. This will be especially important when the cargo is sensitive, such as weapons moving from the manufacturer to the military. LBS will also be used in war zones to alert soldiers at checkpoints when friendly vehicles are approaching ? and precisely where they are. This will dramatically reduce the possibility of friendly-fire incidents.

It is in this arena, the business and government sectors, that the big entrants are now competing. Companies like HP and Oracle are attempting to establish themselves as the leaders in end-to-end LBS solutions and turnkey systems for emergency services, as well as what are called control-plane and user-plane commercial services.

Qualcomm became a serious entrant into the LBS market when it purchased SnapTrack and its Wireless Assisted GPS solution. It now leads the industry in positioning accuracy, with hybrid satellite and terrestrial signals allowing reception and high performance in areas that were previously impossible to reach, such as deep urban canyons and parking garages.

According to ABI Research, the LBS market is currently a $981 million per year business worldwide. Surprisingly, North America has so far lagged behind other countries, generating only 5 percent of the demand. One reason has been the cost of the mandated GPS cell phone locators. Fortunately, the high-end applications in the U.S. are now experiencing growth.

The ABI Research study forecasts that LBS will reach $8 billion per year in global sales by 2010. And a recent study by Berg Insight predicts that LBS will bring 2 billion Euros into the European market by 2009.3

In the meantime, factory-installed navigation systems in cars, now at $3.2 billion per year, are expected to rise to $5.4 billion by 2010, according to an article in Red Herring.4

Companies such as Accenture, for example, are offering an end-to-end LBS concierge for executives. When you arrive in an unfamiliar city, your hand-held device can let you know which nearby restaurants serve your favorite cuisine and then reserve a table. You can locate the nearest pharmacy, the parking garage closest to the client’s office, the best health club, and so on.

Once you’ve located the service you need, you can interrogate it through a live conversation to get the answers you need. The system was developed for Accenture by software maker Opteway, and is referred to as “geo-coded knowledge management.” It compresses data by a factor of 50, so large amounts of information can be sent or received with a single keystroke. Each object is tagged with numerous data points so that it can be manipulated across numerous parameters, whether it’s a hotel or a gas station or another person.

For example, you could take a virtual tour of a manufacturing plant across the globe to maximize the use of your time when you arrive. You could browse new office space across a city by driving around until a light on your hand-held device alerts you to a vacant property. You could then interrogate it for price, square footage, and so on. If you’re interested, you could be put into an immediate video-conference with the leasing agent.

The Trends editors argue that this type of system is going to be essential in the near future for salesmen, delivery drivers, maintenance engineers, and fire fighters, as well as security and police personnel.

In light of this trend, we offer the five following forecasts for your consideration:

First, one of the earliest money-making areas for LBS providers and adopters will be in security functions. For example, All Phase Security in Sacramento, California keeps track of its 200 guards working in various high-security locations around the state by way of hand-held devices that display their locations on a computer map at headquarters. Managers know to within a few feet exactly where each guard is at all times. This means that if a guard is in trouble, or even unconscious, they can immediately send help. This business will grow and spread rapidly and within the next five years will include major metropolitan police forces and fire fighters. Companies that can provide this service reliably will win lucrative contracts.

Second, executive support service at the high end will be the next big market to embrace LBS. When compared with the cost of travel and face-to-face meetings, pre-planning through LBS will make sense, even if it remains fairly expensive at first. Corporations will also keep track of their personnel through LBS so that key people can be located on a moment’s notice when needed. A whole host of corporate services, from information transfer to real estate to remote video conferencing and event planning, will be deployed as this business expands.

Third, as the big wireless providers amortize the cost of having GPS in all cell phones, users will begin to demand LBS on a broad scale. We forecast that the high potential “entry market” for this industry will be teenagers, and it will be pushed initially by the entertainment industry, which has a huge stake in the wireless and LBS market. Early stumbles in connecting people via cell phone LBS services will be corrected, and that cell phone feature will become as commonplace as camera-phones are now. This market will spread upward through the demographic layers until all cell phones, PDAs, and other hand-held wireless devices are LBS-capable.

Fourth, LBS will play a big role in finally making the Internet pay off. While people are not used to paying for visiting Internet sites, they are used to paying for cell phone calls, both when they initiate them and when they receive them. Because LBS services will be mediated through the Internet, phone companies can charge for the so-called “push services” in addition to a subscription fee on top of normal airtime. Similarly, the wireless company can charge the user to store personal and credit card information. It can also charge third parties for billing. For example, if a user interrogates his phone for the nearest gas station selling unleaded fuel at the lowest price, he can be charged for asking the question, and the gas station can be charged for answering it. Then they both can be charged for the credit card transaction. This ability to charge at every step should create high margins in LBS services mediated by the Internet.

Fifth, within 10 to 15 years, we expect to see a consumer backlash as marketers become increasingly aggressive in using LBS technology. As advertisers increasingly push messages to subscribers in certain areas ? for example, when commuters on their way to work are passing a store that’s having a sale ? they’ll inevitably reach a level when many consumers will push back. In anticipation of this, some states have already tested legislative moves to create a “do-not-call list” that would apply to such services. But extremely targeted customer information will make this a much more sophisticated business than today’s world of telemarketing, and the user’s ability to pull such ads selectively will make it much less of a problem than “spam” has been.

References List :
1. Red Herring, October 17, 2005, “Navigation Catches On.” ⓒ Copyright 2005 by Red Herring, Inc. All rights reserved. 2. Red Herring, October 17, 2005, “The Promise of LBS.” ⓒ Copyright 2005 by Red Herring, Inc. All rights reserved. 3. To access the Berg Insights report on the European LBS market, visit their website at:www.berginsights.com/ShowReport.aspx?m_m=3&Id=36 4. Red Herring, October 17, 2005, “The Promise of LBS.” ⓒ Copyright 2005 by Red Herring, Inc. All rights reserved.