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AT&T Revs Up Auto-Industry Push With Service Called Drive

AT&T Inc. (T), looking to fuel growth by expanding into the auto industry, is introducing a package of services and products that will let carmakers run diagnostics, sell applications and bill consumers wirelessly.

AT&T Drive combines the carrier’s own services with offerings from partners such as Ericsson AB and VoiceBox Technologies Corp. The technology, which is being unveiled at the AT&T Developer Summit in Las Vegas, will build on the company’s existing connected-car effort by making the services faster and easier to deliver, said Chris Penrose, senior vice president for emerging devices at Dallas-based AT&T.

The move pits AT&T against traditional providers of in-car electronics, said Thilo Koslowski, an analyst at Gartner Inc. Already, the phone company has been helping carmakers connect vehicles to wireless networks. Now it aims to be a top-tier automotive supplier, offering a broader range of services to the industry, Koslowski said. That could make it harder for automakers to switch to another carrier.

Related: Samsung Eyes Auto Expansion as High-End Smartphones Slow

“The value proposition increases if you provide more than just the connectivity component,” he said in an interview. “Now you become more of a strategic player.”

For years, AT&T has been working with carmakers like Nissan Motor Co., Bayerische Motoren Werke AG and Ford Motor Co. to offer in-car wireless service. Last year, it also announced a partnership with General Motors, which will start making AT&T’s connectivity available in its cars and trucks for the U.S. and Canada in 2014. More automotive relationships will be unveiled in the coming weeks, Penrose said.

Garage Laboratory

In addition to debuting Drive, AT&T is opening a 5,000-square-foot (465-square-meter) facility in Atlanta that will serve as a working garage and full showroom for the services. Called the AT&T Drive Studio, the operation is the first carrier lab dedicated to connected-car innovation and research, Penrose said. The lab has already conducted six months of work, he said.

The idea is to make it painless for auto manufacturers to add wireless technology, including hardware.

“We take all the heavy lifting from them,” Penrose said.

AT&T rivals such as Verizon Communications Inc. and Sprint Corp. also are working to add Internet features to cars. Verizon acquired Hughes Telematics Inc. in 2012, giving it a bigger foothold in the market.

In five years, about 5 percent of carriers’ data revenue will come from connected-car services, up from less than 1 percent today, according to Chetan Sharma, an independent wireless analyst in Issaquah, Washington.

Car Focus

AT&T is making the announcements on the last day of its developer conference, which began on Jan. 4. The summit overlaps with the International Consumer Electronics Show, which will feature a record number of automotive exhibitors this year. Nine automakers and a total of more than 125 car-industry technology companies are demonstrating their gear at the show. Rupert Stadler, the chairman of Audi AG, will be one of the keynote speakers.

AT&T makes money by selling wireless service to automakers, which use it to remotely update in-car software or to power safety applications. Consumers also are increasingly relying on the connections for in-car touch screens and the downloading of apps.

About 17 percent of U.S. households own a car with a connected communication and safety system, said the Consumer Electronics Association, which puts on the CES show. The global connected-car market will grow about 35 percent annually, reaching $131.9 billion by 2019, according to estimates from Transparency Market Research.

For AT&T, connected-car revenue is part of a broader effort to decrease the company’s reliance on phone services.

“We think all of this is really going to be important and is going to drive growth for the next four or five years,” Randall Stephenson, AT&T’s chief executive officer, said at a conference last month. “And we don’t think it’s inconsequential growth.”

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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