General Motors And AT&T To Work On Connected Car

Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The top US automaker, General Motors (NYSE: GM), announced that its OnStar unit, in collaboration with AT&T (NYSE: T), will start offering high speed LTE network service in its cars that willstart rolling out late in 2014. Since OnStar's introduction in the 1990s, Verizon (NYSE: VZ) had the contract to provide the service's network, but now it seems to have been jilted in favor of its archrival.

OnStar lets drivers connect to live operators who give directions and provide emergency assistance. Adding LTE service in most of the Buick, Chevrolet, Cadillac and GMC models in 2015 is part of the Detroit giant's safety and security measures, and will hopefully boost sales in both the US and Canada. Other than GM, Audi and BMW have also expressed their plans of working on built-in LTE in their models. Let’s check the details of the additional services that the wireless connection would add.

The service – ‘basically smartphones on wheels’
The agreement between the automaker and carrier requires AT&T to provide 4G mobile internet access to upgrade GM’s OnStar safety and security services, along with a fresh line of infotainment services that include streaming audio and videos, web access, and faster application downloads.

One of OnStar's major functions is to check on the condition of the vehicle, tracking problems that need immediate maintenance or some repairs down the line. It provides safety to drivers by giving more accurate traffic data, while passengers in the back seat can enjoy movies and television shows. In the words of Glenn Lurie, head of AT&T's Emerging Device Division, "they’re basically smartphones on wheels," according to an Associated Press story. Contract details have not been disclosed yet. Also, there is no estimate available regarding the price that will be charged for these add on features.

AT&T already has wireless deals with other auto giants, including Ford, BMW, Nissan, and Tesla, but the OnStar contract is the biggest of them all. AT&T Chief Executive Ralph de la Vega considers the GM contract to be a huge opportunity for the company. The second-largest US telecom operator is closely working with the automaker to build the base of connected cars by providing distinctive services that would give an enhanced experience to drivers and passengers.

However, one question arises: What made GM shift from old friend Verizon to AT&T?

Something in common
AT&T had been in talks with GM in the past few months regarding a possible partnership. GM got really impressed with AT&T’s vision of having connected cars, which largely coincided with the idea that the automaker had built.

Phil Abram, Executive Director of GM, said, "AT&T's vision with what we want to do with the connected vehicle was very highly aligned."

The automaker was particularly amazed with AT&T’s ambitious plan of building its network infrastructure. The national wireless operator is expected to have coverage for about 300 million Americans by the time GM rolls out its LTE enabled vehicles.

Both Verizon and AT&T have been working hard to widen their service line beyond phones before the mobile market reaches a saturation point and growth slows down. In the past year, Verizon acquired Hughes Telematics for $612 million, sensing huge potential in this auto telematics business with great prospects for the connected car concept. The carmaker hasn’t commented as to why it is shifting from Verizon to AT&T, but said that Verizon would continue supporting the OnStar service for all vehicles that come to the market before 2015 models. Verizon hasn’t commented as yet.

Summing up
Other than offering 4G LTE connectivity through OnStar, AT&T and GM are closely coordinating to come up with other unique communication applications to increase the element of safety when driving. While the wireless service will help GM to increase sales by making an interesting offer as this, it would help AT&T in diversifying and adding another source of revenue in the highly competitive wireless market.

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