February 13, 2006

Telecoms, Web Firms Jostle Over Location Services

BARCELONA -- When U.S. regulators, responding to the September 11 attacks, required that mobile handsets carry an electronic beacon giving the user's whereabouts, they handed telecoms and technology companies a hot new business opportunity.

Sprint Nextel and Verizon are already using the technology to help companies locate employees who are on the road and to aid travelers planning a weekend trip, charging up to $15 a month for their services.

But Google Inc. and other Web services firms are now stepping into the arena, threatening to bite into the phone companies' share of the market even as they offer opportunities for cooperation in new types of services.

Google, Yahoo Inc. and Microsoft Corp. have an edge over carriers because of their low costs and their ability to reach any customer with a browser -- increasingly a standard feature on cell phones.

"No group is better equipped to steal the march than the Internet services companies," said Mark Becker at Atos Consulting.

They may develop services in-house, but they may also be tempted to buy established navigation brands such as TomTom, or software firms such as Route 66 in the Netherlands, Telmap in Israel, or Navicore and Wayfinder in Sweden, Fortis Bank analyst Felix Oberdorfer said.


Opportunities for location services got a major boost from the United States' e911 directive, which aims to help emergency workers to locate people in need.

In response, U.S. telecoms operators in the United States now sell mobile phones that contain a Global Positioning System (GPS) chip, which gives the user's precise position, and software to speed up the location process.

That software, which assists the GPS and hence is named Assisted-GPS, or A-GPS, is used in the services offered by Sprint and Verizon.

Only seven years ago, navigation systems that used GPS technology were an exclusive feature in expensive cars that added $3,000 or more to the vehicle's cost.

Around 2002, navigation systems, while still used mostly as a driving aid, broke below $1,000 for a handheld computer connected to a GPS unit.

Today a dedicated standalone navigation device from TomTom or Garmin, which a user can carry anywhere, costs as little as $300 and the companies estimate that 14 million units will be sold this year alone.


Now that handsets in the United States and several Asian markets are being fitted with GPS locators, the focus is set to shift again, away from the hardware and 1-gigabyte memory cards that can store maps of entire continents, to navigation services.

This plays into the hands of Internet companies and threatens the profitable business of device makers.

"Access to location-based services via an Internet terminal, which can be a phone, means that the number of hits is the real value driver," said Fortis Bank's Oberdorfer.

All major navigation technology firms are present at this week's 3GSM conference in Barecelona, the world's biggest mobile communications trade show, as they target the 810-million-unit-a-year cell phone industry.

"All the navigation companies and all the Googles in this world are interested in the sector," said Panu Vuorela, chief executive of Finnish navigation software firm Navicore.

Mobile operators are wary that they may soon be subsidizing expensive handsets and upgrading their network to accommodate positioning technology, only for Google to start offering free navigation services paid by advertisers of area shops and facilities.

Google, on its Google Local service available in the United States and Britain, currently offers free navigation twinned with local businesses and services on desktop computers. It has taken the first tentative steps to bring the service to phones.


Telecoms carriers around the world have recognized the threat and are figuring out how they can work together with the likes of Google rather than trying to compete with them.

"There are quite intense discussions going on at the operators. Some are really unsure how they should invest in location-based services," said Chris Wade at Cambridge Positioning Systems (CPS), a British company that offers positioning technology.

Citing trends in Japan, South Korea and China, he said operators may find cooperation easier than marketing their own services.

Piggybacking on U.S. efforts, CDMA wireless telephone operators in South Korea have already embraced the technology, offering services that let users know where a friend or family member is.

In Japan, location-based services on cell phones are a godsend for pedestrians and drivers who struggle with the country's arcane system of addresses and house numbers.

Telecoms operators which use the WCDMA and GSM wireless standard -- used by 1.7 billion of the world's 2.2 billion cell phone subscribers and a rival to CDMA -- are considering how to match such offerings.

GSM and WCDMA operators have access to a similar positioning system, called Enhanced-GPS, or E-GPS, which uses a $16 GPS chip that can determine a nearly exact position within 30 seconds, in open areas with good line-of-sight to satellites.

Even when the signal is interrupted -- a problem indoors or in high-rise buildings -- a $1 software program from companies such as CPS can locate a phone within an area of 100 or 200 meters within four seconds, by bouncing signals off several cell phone antennas. This is sufficient for many local searches.