Intelligent Transport Systems - Telenor

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Jan A Audestad (61) is Senior Advisor for Telenor Corporate University. He is also Adjunct Professor of telematics at the Norwegian University of Science and Technology (NTNU). He has a Master degree in theoretical physics from NTNU in 1965. He joined Telenor in 1971 after four years in the electronics industry. 1971 – 1995 he did research primarily in satellite systems, mobile systems, intelligent networks and information security. Since 1995 he has worked in the area of business strategy. He has chaired a number of international working groups and research projects standardising and developing maritime satellite systems, GSM and intelligent networks. jan-arild.audestad@telenor.com 2 A Side Mirror View to Road Telematics JAN A AUDESTAD 1 In the Driver’s Seat About 100,000 new cars are sold per year in Norway. This provides us with a simple model for estimating the business potential of road telematics or intelligent traffic systems (ITS) in Norway. New cars have become computer platforms where the computers monitor signals from a large number of sensors to detect faulty operation of the car and to optimise the operation of the engine: mixing of air and fluid, timing of the combustion sequence, and reducing the amount of pollutants in the exhaust. Suppose that every car is equipped with a GSM terminal in order to support remote maintenance and monitoring of the car. Then the total number of mobile subscribers is doubled in Norway. Since GSM communications are used for special purposes (remote monitoring and maintenance) generating little traffic on the radio connection, it is likely that the total revenue of mobile communication is less than doubled. Nevertheless, there is a huge business opportunity associated with computerising the car. New lorries and some expensive makes of private cars are equipped with GSM communication and it is expected that cars in the medium price range will soon follow suit: all these vehicles already contain formidable computer platforms. Within a few years mobile communications will be common in all types of vehicles. It is reasonable to assume that only new cars are equipped with mobile communication devices during the manufacture of the car: it is simply too expensive to retrofit old cars with such capabilities. On the other hand, it is cheap to install the device in new cars. Then there is a potential for 100,000 new mobile subscribers per year in Norway; that is, if all new cars are equipped with mobile terminals. These subscribers are of a special kind: they are there not because of the market efforts of the mobile operators but because the car manufacturer has installed radio technology (GSM, UMTS, WLAN or whichever other mobile technology that exists) in the car for the technical operation of the vehicle – the owner of the car may not even know that the mobile terminal exists. Thus there is a new type of subscriber that behaves in a different way than other subscribers. Let us see why. The car manufacturer may include the communication capability as part of the total price of the car. From the viewpoint of the car manufacturer, communication is not more peculiar than the wheel rim: both are there to meet certain requirements for driving that particular car. Therefore, the car manufacturer may like to increase the total price of the car in order to incorporate telecommunications. The car manufacturer will then probably ask for a price offer from each mobile operator in the country of manufacture 1) and choose the cheapest or the most flexible offer. The price may be an amount that will cover all future communications with that car for its whole lifetime. This is simply the present value of the expected usage of telecommunications. Suppose that the mobile operator values the communication to NOK 1000 per year and assumes a discount rate of 10 %, then the net present value of all future communication requirements of the car will be NOK 10,000. This is then the price that the car manufacturer must add to the price of the car. The revenue potential in Norway is then 1 billion NOK per year if every new car is equipped with this facility. However, there is a crux to this reasoning. The 1 billion NOK may not be paid to any mobile operator in Norway. It may be paid to an operator in the country of manufacturing, e.g. Germany. When the car is sold in Norway, it simply roams to a Norwegian operator, and if the car never places a call, there will be no income whatsoever for the Norwegian operator! Therefore, the 1 billion NOK may be the income of other mobile operators. For the mobile operator in the country of manufacture life is not simple either. Because there are several mobile operators in each country, they have to compete for these contracts, but in each country only one of them will win the contract. However, there are nevertheless so few mobile operators in each country that the market is not ideal but is an oligopoly making the fight 1) Of course, the car manufacturer may have a commercial agreement with an operator in another country if this operator is cheaper. Roaming will take care of the technicalities. Telektronikk 1.2003
for the contract fierce. Let us illustrate the problem the mobile operators are facing by moving the game to a familiar playing ground. In Norway there are two GSM operators. Each operator observes that one of the following scenarios will unfold. Winning the contract to equip all cars with GSM means that the smaller operator (Net- Com) in due course becomes the dominating mobile operator. If Telenor wins the contract, the position of Telenor will be even more dominating than it is today. In practice, Telenor becomes a monopoly. The game that the two operators then are forced to play is the most dangerous of all business games, namely the prisoner’s dilemma, where all players are likely to lose ([1], [2]) because the operators must underbid each other until one of them loses because of lack of finance. More than 30 million cars are manufactured each year. The total value of telecommunications for these cars is then more than 300 billion NOK per year. In countries with large automobile manufacturers such as Germany, this represents huge revenues for the mobile operators in these countries causing a severe price pressure on the competition for contracts with the car industry. This is so because it is the car manufacturer who selects the mobile operator and not the person buying the car. The contract is thus not for one car but perhaps for a whole production series of one million cars. Of course, the picture is much more complex than described above. However, even with more exact market estimates and more nuanced business models the reasoning will lead to the conclusion that this business is not controlled by the mobile operators: the driver’s seat is occupied by the car manufacturers. There is no simple way in which the mobile operator can gain access to this market. The estimated cost of road accidents in Norway is 25 billion NOK [3] per year. This includes 5 billion NOK of direct insurance payments and 20 billion NOK social costs (injuries and deaths). In Japan the estimated cost is about 500 billion NOK per year. These figures of course depend on how social costs are computed. These vary from country to country depending on factors such as culture, political system, demography, and gross national product. These huge sums are the motives for all the various actions taken to reduce road accidents. The actions taken include building safer roads and safer cars. In its extreme, reducing accidents is centred on building the driverless car. This includes building roads and communications systems that keep the car to the road in such a way that two cars never collide. The car is then Telektronikk 1.2003 steered by computers and not by people. The less extreme direction is the one taken in Japan where roads are equipped with sensors such that the car can detect when it leaves the lane and take corrective actions by overruling the manual steering. The point here is that whichever method is used for making the road safer, communications is required between the road and the car. This again requires a comprehensive communications system along the road consisting of optical fibres, switching devices and radio access systems (GSM, UMTS, WLAN, Bluetooth or whatever is the most efficient and cheapest system) for communication between sensors, communication with control centres and communication with the cars. Extending the reasoning a little further, this implies that a new communication infrastructure is built along the roads. This may not even be expensive because ducts used for street lighting can also carry communication fibres, and radio base stations can be mounted on street lamps. Furthermore, roads lead to where people live or work. The roads and the streets can then be used for building a new telecommunications infrastructure. This development is not under the control of the telecom operator extending broadband to the home. Road authorities and companies offering various types of traffic management may then occupy the driver’s seat. Payment systems include automatic payment of road toll, parking charges, and other taxes for using private cars. The motives for road payment are several. One motive is that the users of new roads, bridges and tunnels should pay what it costs to use them. A second motive is that the owners of land should get paid for the use of it. A third motive is to reduce access to cities in order to reduce pollution, reduce noise, reduce land usage and make the city a better place to live. The fourth and probably the most important motive is to increase government income in order to improve a stressed economy. Road payment systems also require telecommunications involving interaction with banking networks. The decision to construct these systems is taken by road authorities, city councils and governments. The telecom operators are not involved in the decision process. The decision makers may even decide to build an infrastructure independent of that of the telecom network. The decision makers may also outsource the building and operation of the system to a telecom operator. Alas, that may be our competitor! 3
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Page 6 and 7: Figure 1 Example of MEMS 4 Therefor
Page 8 and 9: 6 Sensor Figure 3 Road with electro
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Page 14 and 15: Figure 1 Mainstream taxonomy of ITS
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Page 24 and 25: Table 1 European Architecture Proje
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