3G: It’s Not Just About Cell Phones

Now that title doesn’t surprise very many readers, I’m certain. Nearly all of us are familiar with the PC Card cellular modems that plug into laptops, and are aware that the newer USB versions have hit an even steeper trajectory of sales growth. One of my Cisco friends often says “I live on 3G,” and he’s referring to the reality that with his home in North Carolina, his co-workers in San Jose, and his customers spread in between, nearly all of his Internet consumption travels via the Verizon Wireless EVDO card in the laptop he uses while on the road.

 

Many of you are also aware of the rapid advancement of Machine to Machine (M2M) communications and the dozens of MVNOs sprouting up to focus on it. That industry uses 2G and 3G devices integrated into equipment, such as oil rigs, billboards and windmill generators, to transfer the real-time and non-real-time data needed to keep performance high and costs low.

 

But 3G is showing up in lots more places too, and we’ve only just begun to see the spread. I am personally intrigued with the use of 3G to enhance devices that we were familiar with in a prior version . In a previous posting I mentioned the recent arrival of 3G integrated into Personal Navigation Devices. I want to take that theme farther now and start building a list of newly connected devices.

 

So, here’s the criteria for making it on to the list:

–          Human oriented devices, that is, unlike M2M the purpose of the device must primarily serve for human consumption.

–          One of the following:

o       Devices whose traditional functionality is enhanced via the 3G connectivity.

o       Devices whose traditional functionality is maintained while valuable new functionality is added via the 3G connectivity

o       New devices that weren’t feasible or practical without the 3G connection

–          And of course, primarily voice oriented devices, such as cellphones, are excluded

 

Here’s the complete list of 3G enabled devices that I am currently aware of:

–          Amazon Kindle – A true breakthrough product, and even more so because I believe that most Kindle owners are only vaguely aware that the thing is using Sprint’s cellular network.

–          Personal Navigation Devices – notable for the absence of Garmin or Motorola

o       Dash

o       Insignia

–          IVC Remote Video Security Camera – Good news for construction companies. Now you can remotely monitor any location that falls within 3G coverage.

–          Vizit Photo Frame (coming Spring ’09) – In my view a digital photo frame is most useful in the role of bring Grandma into the loop of digital photography, allowing her to appreciate the photos you take of the kids without requiring all the messing around with printing. But, how many Grandmas have WiFi????  Send her this frame in the mail. She plugs it in. You send photos to it. Simple.

–          uConnect Web service (aka Autonet Mobile) available in 2009 Chrysler vehicles. Now the kids can keep their iPod Touches operating while the family is on the road.

–          LG Watch (LG-GD910) – OK, just what you always needed, video streaming to your wrist!

 

Please point me to other products that you know about and I’ll add them and give you credit.

 

Here’s some devices I’d like enhanced with 3G:

–          YouTube Video Cameras

–          Digital Cameras

–          Handheld Multi-Function Displays for aviation, e.g. the Garmin 696, using Aircell’s EVDO network

 

I’d love to hear your ideas for products that are ready to be connected.

Garmin’s Predicament

Garmin’s Personal Navigation Device (PND) business used to enjoy excellent gross margins but those margins are rapidly slipping as lower cost competitors are taking away significant market share.

 

I continue to admire Garmin for their ongoing innovation, and their PNDs are rapidly increasing functionality as general purpose GPS devices. However my own PND is an off-brand, purchased for $100 at Fry’s, and it even includes spoken street names (aka TTS) and NAVTEQ maps! It’s a Windows CE based platform so I give up some UI elegance in exchange for the low price.

 

So, one key threat they face is the entry of low cost competitors, some of whom have adopted an open-platform strategy. Garmin remains completely proprietary.

 

VZ-Navigator has also shifted the landscape, followed by similar offerings from Sprint, Alltel and others. Credible industry analysts are predicting that personal navigation and associated capabilities will be largely taken over by cellphone applications in the near future.

 

So, a second key threat they face is the emergence of cellphone applications as substitute solutions that can be easily adopted by consumers since they don’t require the user to possess yet another piece of equipment; everybody already has a cellphone.

 

Virtually all of these GPS solutions depend on geo-content obtained from either NAVTEQ, the leader, or TeleAtlas. I think Tom Tom, the leading competitor to Garmin in the PND space, foresaw how things would unfold and acquired TeleAtlas for the purpose of reverse integrating into what might actually become their primary business. There are many more barriers to entry in the geo-content space than there are for PNDs.

 

And, of course, NAVTEQ has been acquired by Nokia, the world’s leading cellphone vendor. (The strategy behind that move might be the topic for a future posting.)

 

So, the third key threat Garmin faces is that the primary suppliers of the geo-content upon which they depend are now allied with competitors.

 

What should they do? They are at a fork in the road, consisting of the following choices.

 

First, they could deemphasize their own proprietary approach and embrace third party platforms, then seek to become the navigation software application of choice for every cellphone, Windows device, and OEM’d nav solution in vehicles. Admittedly, they are late to the game here, and their differentiation is not obvious, but it may be their best shot at maintaining a significant share of the navigation market.

 

Alternatively, they can continue to embrace their proprietary platform approach and crank up the innovation engine to leave competitors in the dust. They may be late to the game here too. For example, they should have been first to market with a “Connected GPS” device, but Dash Navigation and Insignia beat them to the punch. Garmin wasted precious R&D time on the misguided Nuviphone when they should have pursued cellular connectivity as an integrated function, a-la the Amazon Kindle, rather than the primary role of the device.  A Connected GPS device is a GPS device first, and the cellular data connection is complementary.

 

(By the way, what could Garmin have been thinking when they invested in developing a cellphone? Yes, Apple succeeded, but that’s a very tough business to make a go of.)

 

With cellular data a GPS device can add many new capabilities, including the obvious ones of real-time traffic reports and traffic based routing/rerouting. As another example, I would love to have a PND that overlaid graphical weather right onto the map display. Think of a mash-up between a Garmin PND and the MyWeather application available as a download on iPhones.

 

So, I recommend the second approach: A high margin business based on innovation on proprietary platforms, but without the dominant market share they’ve been used to.

 

From where I sit as an outsider I can’t say they are assured of success long term in the consumer space. They remain well-positioned in aviation and marine products, but the entry barriers are much higher in those markets, especially in aviation where FAA certification is an expensive process.

 

I’m watching to see what their next move will be. I’m betting that Garmin’s Connected GPS device will soon arrive, but it has already missed the Christmas season. They have some catching up to do!