Connected mobility standards in modern automobiles offer both automakers and consumers big rewards.
As we have written before, connected cars offer new services including over-the-air software and traffic updates, mobile hotspots, remote monitoring and automatic collision notification to emergency services. But how much of the price people pay for those connected mobility services goes to standards developers, and how much to vehicle manufacturers?
Looking at major automakers, we see that most offer new connected mobility services in packages at different price points.
The data seem consistent with a 2020 study in which consumers are estimated to pay between $600 and $20,500 for connectivity packages over the lifetime of a car, depending on the brand.
Perhaps more worrying for consumers is a trend of some automakers pay-walling for specific features that already come with cars. For example, BMW seems to have started selling heated seat subscriptions for $18 per month, while Toyota is charging drivers for the convenience of using their key fobs to start their cars remotely. In 2021, General Motors claimed to have generated nearly $2 billion in revenue from in-car subscription services. GM said it expects this to reach as much as $25 billion by the end of the decade. This exemplifies the rise in the importance of new car subscription services powered by connected mobility standards. According to some estimates, the market for monetisation of vehicle data could be worth as much as $750 billion by 2030.
In fact, only a tiny fraction of the amount automakers charge consumers for connected mobility services actually goes to pay for the cellular connectivity standards without which they would not work.
Avanci is a licensing platform that has gathered almost all SEP owners together, creating a one-stop-shop for licensing cellular connected mobility standards to automakers. It charges automakers a flat fee of no more than $20 per car, regardless of the final sales price of the vehicle or the manufacturer, for the licensing of patents for 2G, 3G, and 4G standards. That is not $20 per month or per year. It’s $20 over the entire life of the vehicle. We like to describe it as unlimited connected mobility for the price of a good car wash.
Currently, Avanci’s 4G programme covers licenses from 57 SEP owners. It has concluded licences with many of the largest automakers in Europe, the U.S. and Asia, representing more than 80% of connected vehicles worldwide. Avanci recently launched a 5G licensing programme for connected vehicles – for $32 per vehicle – and already covers 61 SEP owners. An early bird fee of $29 is available if licences are concluded before 16 February 2024 or before the first sale of a 5G connected vehicle.
A licence for cellular connectivity and related technologies represents a small fraction of the value that automakers realise by selling connected mobility services to consumers. Given this, you might think automakers would cherish a one-stop shop solution for licensing standardised technology. After all, this is technology in which many contributors collectively invested many millions (if not billions) of euros over many years. Instead, quite the opposite has happened. Some automakers only entered into licences with Avanci after legal battles around the world—all of which those automakers lost.
Given the success of market-based solutions in the licensing of SEPs to car manufacturers, it’s fair to ask why the European Commission saw a need for its proposed SEP Regulation. The Commission’s Explanatory Memorandum states that licensing disputes in the automotive sector are one of the reasons for the proposed Regulation. More likely, the problem was in the reluctance of certain automakers to pay for the use of technology that is bringing them so much value from connected mobility services.
To answer the question at the beginning of the post – automakers are earning billions from new connectivity-enabled services. On the other hand, they are paying no more than $20 (for 4G and earlier generations) or $29 (for 5G and earlier generations) per connected car for the use of the technology that is the basis for all their added-value services. It does not it look like the automakers need a regulation to protect them from patent licensing.
Connectivity standards are foundational technologies which enable other innovations that follow. It rests on the virtuous cycle of research and development of new technologies and their subsequent contribution to standards. The system relies on licensing income, which is often realised a decade or more after the first technology investments were made. This system needs to be protected and strengthened. We are concerned that the European Commission’s proposal to regulate SEP licensing will undermine incentives to contribute to open standards development and invest in future critical enabling technologies such as those which enable connected mobility today.