Tesla turns to AT&T to power its connected car strategy

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Session name: Business Models that work for the Connected Consumer
Chetan Sharma
Chris Penrose

Announcer 00:00
All right, going to talk about business models that work for the connected consumer, that’s going to be a discussion between Chetan Sharma, he’s the president of Chetan Sharma Consulting and an analyst with GigaOM Research which I’ll be visited outside in the booth, if not you should after this is done or during the next break and he’s going to be talking Chris Penrose, the SVP at AT&T, please welcome our next panel to the stage.
Chetan Sharma 00:28
Thank you it’s my honor to be here, thanks to Om and team for inviting me back. I’m delighted to have Chris Penrose, SVP at AT&T to be talking about connected devices, what’s happening in the space especially around business models and how those are changing and impacting the echo system. So, as some of you might know that AT&T is one of the leading companies in the US, not only in the US, but also the world when it comes to connected devices with over 15 million connected devices as of last quarter. It has come to that point by introducing some breakthrough business models around tablets coming in the following years and connected. So, first I wanted to just start off with the business models around a data for Smartphones and tablets, your shared data plans have been quite successful and so have rising I’ve seen with success as well, what’s next, data price for things like tablets.
Chris Penrose 01:32
Well it’s great. Pleasure being here with everybody else, what we’ve really seen with the connected tablet space is this idea of actually being to add to your talent to mobile share for only $10, this is really being a big spike in the adoption rate of connectivity. If you just think back August of last year, it was $30 or $50 a month to have your tablet connected, now you can have it for just $10 and we’ve also offered a number of standalone plans, there you can attach and were pretty excited actually today to talk about fact that we’ve just introduced some new casual rate plans that are targeted for folks that may not be using it as frequently to desire a monthly plan and so, we’re going to use the day-pass, so for just $5 you can now have a day-pass for 250 megabytes of data. We’ve also introduced a $25 one gigabyte plan lasts for three months. And so, offering of these different solutions, they are really appealed to all the different used cases, really is going to continue to drive the adoption, we really thank that a Wi-Fi only tablet is good, but it’s not good enough and what you’ve really need is a combination of Wi-Fi and LTE to give you that experience we can use that anytime, anywhere and offering up the different solutions like these day-passes will enable people to take advantage of that.
Chetan Sharma 02:48
So, pricing is great. Pricing and choice is great for consumers, one of the hindrance is in mind has been also, the billing materials for the tablet itself in terms of the Delta between Wi-Fi and Wi-Fi plus cellular. What’s the state of affairs when it comes to the Delta or the Balm for the LTV or Cellular Module?
Chris Penrose 03:08
So, AT&T we’re very focused and working with all the manufacture products is to continue to right down that cost of putting LTE and the tablets over the course of time and we’ve seen that prices come down substantially over the last several years and in conjunction with that we’ve also done a number things to address promotionally how we can close that gap between the Wi-Fi only tablet and a connected tablet and so you’ve seen a software solutions were for a $100, you get 100 discount, we sign a two contract on your tablet basically eliminating any Dells out there, we’ve also done some amazing promotions where you buy Smartphone and you get a deeper discount on tablet. So, between promotions, pricing and us working also on the ultimate Balm cost, our vision is that ultimately we’d like to see tablet manufacturers just build one tablet, build a tablet there is Wi-Fi and LTE connectable and let the customer choose how they want to connect that on, just to simplify it for everyone and also give the customer the ultimate choice.
Chetan Sharma 04:06
Now, there has been talk about adding other types of devices beyond the Smartphones and tablets onto your data plan or just buy them separately. One of the biggest categories that have been talked about for the last 12 months is connected cars. Could you talk about what’s the business model and what’s the opportunity for AT&T in tackling the connected car?
Chris Penrose 04:29
So, we think at AT&T the connected car opportunity is this huge and we’ve had a number of great successes and wins in the space and there’s a number of different business models that can’t exist in the car, we see you’ve traditionally a wholesale type of connectivity model we’re dealing with the manufacturer themselves about the deal. They want to pursue another car, but as you’re going to bring in some of these RBM with services, the opportunity to take that data there’s being driven either through streaming on a radio or any other type of bandwidth service and be able to take that data and pass it on in the way of charging it to a customer for their consumption is really, really big and so we’ve got the ability to, we call bifurcate billing and that is a split that off a single ship we can now split that billing between both the consumer and the auto OM and that is adding a ton of value in the space. We also think that you should have the ability to build a car onto as a mobile hot spot for a trip just like you might do on an airplane, if you haven’t subscribed the data plan you should be able to turn that on and so we can offer such base plan, we can also include let’s say the kindle type model in the car, maybe one of download in audio book and it has a subscribed data well then in the price of that book comes the cost of the data consumption and offering up them unlocking all those different business models for our OEM partners both domestically and around the world is really what we’re trying to focus on AT&T.
Chetan Sharma 05:54
In Barcelona you guys announced the partnership with GM next year if not or most of the malls will have LTE, are there some other OMC have you working with?
Chris Penrose 06:06
Yes, we’ve had a longstanding relationship with BMW out there as well as Ford and Nissan, we’ve also have relationship with Tesla and MGM as you just mentioned is our biggest relationship, we’ve got today where GM has done an equally as made a decision to put LTE connectivity and every single vehicle, so across all 72 makes and models starting mid 2014 and open the cars we’re rolling out with LTE enabled in those cars.
Chetan Sharma 06:32
In the business models across the various — of pricing of the cars they vary?
Chris Penrose 06:37
Yes. What we’re working is with each auto partner we work on a customer solutions that fits their needs, some automobile partners are wanted to actually include that data into a price with a other tele-metric services they are offering, others are looking give way some of that for free with the price of the car, each one of them is taking a little bit different approach and so we’ll customize that solution to work with them and like he mentioned earlier, but we ultimate think you can here have a standalone data plan for the car or you can even have it as mobile share plan to use of the data that you have for Smartphones and tablets you can hang it to car as well.
Chetan Sharma 07:13
Now, Tesla has a pretty much a computer monitor screen on the car and it could be consuming a lot of data in terms of especially we start doing any kind of videos streaming or just the broader data could be enormous. Do you expect the bundles to be different than say a tablet bundle or what should consumers think about a data pricing in automobiles differently?
Chris Penrose 07:36
Yeah, having gone out with the formal pricing announcements in the space, but the capability sets of being able to split the data off between what the automobile manufacturers are going to pay for themselves as well as what the consumer can pay for all there and it will come down to that each individual OEM, will make that decision they might decide based upon the type of the car that they want to include more or less data in that and, but we’ll make sure that we’ve got very compelling and great offers out there for customers and we also have to serve for customers that aren’t necessarily AT&T customers in these cars and so being able to standalone plans that work for them as well we’ll be able to do that so that every customer can be connected.
Chetan Sharma 08:12
Now the connectivity piece in the automobile is obvious, right I mean you need connectivity in the vehicles, you’ve got information and so and so forth. From an AT&T’s point of view where is the value going to be going forward, is it in the connectivity that you’re focused or also the value added services that you build on top of it. Is it going to be built by AT&T, the auto guys or third parties like how’s the ecosystem going to evolve for the car?
Chris Penrose 08:37
So, I think what you’re seeing out there is that AT&T has a desire to offer up a set of services to our partners across the spectrum, and again, we’ll partner up with each individual, OEM to decide where do they want us to play and whether they want basic connectivity or they want application, the platforms, speech and ailment services and also is the lot going on in data analytics and amazing things you can do it to mind the data coming off the car and our vision is we want to be able to play that role, for each automobile manufacture, how they want to see it fit with customized solutions to help them win and competent in the space.
Chetan Sharma 09:12
It seems like just looking at the connected car space that, traditionally from being a service provider you’re becoming solution provider, offering more packaged and more bundled product type solutions, is that a fair assessment as to how AT&T is thinking about some of these new areas?
Chris Penrose 09:29
Absolutely. We really do believe that our ability to bring total solutions in the space is something that is being demanded and something where we can excel and differentiate not just being a connectivity partner, but help me bring the four ecosystem of solutions and customize it for each of our partners to give them exactly what they, so that they’re going to be ultimately sell more cars and have happy customers.
Chetan Sharma 09:52
Clearly, AT&T is a big brand in the United States, but does the emerging device space open up opportunity overseas for AT&T?
Chris Penrose 10:01
Yeah, absolutely. We do see this as being a global opportunity and we announced actually couple of years ago the work we’ve done around our global SIM and this is a unique product where we now can offer up to your partners, they build it for a single SIM chip into their vehicle or into any other device for that matter and we can then light that up on that local network and that local country under a number of different models whether it’s under a traditional roaming type relationship or an agency relationship, we can scale that across whatever the demands are from the local government and be able to serve that up so that you only have to put one chip in and make that work anywhere in the world and so we’re very excited, we do believe this is not just an domestic place to play we’re working that to be able to deliver these services across the globe.
Chetan Sharma 10:48
And another area that has been coming up quite frequently is healthcare or wellness or when you combine that two categories together. Clearly, in terms of the business models for our OM it could be different parties who are subsidizing or responsible for collecting the payment. How do you see the healthcare industry adopting it’s business model in terms of who pays for a given service that have been enabled by mobility?
Chris Penrose 11:15
I think the health industry is getting very, very excited, we think it’s one of the biggest areas of promises we went forward, but to your point that the peer models have been challenge I think to-date is. We are doing a lot in this space, we ultimately think that it’s the aggregation of all these different data that’s out there that’s going to be really changing the paradigm of payment. The fact that you’ve got all these different sensors and variable type of devices and how can you pull all that information together to give you a picture of self and then how can you as a consumer then decide how do you want to share that information that begins unlock some really interesting and unique business models and so I think you’re going to see a lot of different things happening in the space and there’ll be insurance plan, there will be doctors paying and there also will be, might be farmer and will be consumer and our ability to bring together the right business model, so they make sense for who’s paying and the value that they are getting in return for that is really what we’re focused for as we go forward.
Chetan Sharma 12:15
As you think about data clearly you’re entering in a different new territory of business that typically services providers have not attacked before. I mean, they’ve used data for their own purpose from churn management and fraud management and so and so forth, but using that for new products and service is something new, you’ve the likes of Google and Amazons the world compete. So, talk to us about the comparable landscape in these new services as to who do you see as competitors going forward, do you see the enough players as the dominant competitors or is it going to be the traditional operators?
Chris Penrose 12:46
There’s definitely been a lot business that have been built up and they have been very, very successful based upon data and you mentioned some of those players earlier, so we do see it using the very competitive landscape, we ultimately believe though AT&T were in a unique position with regard to the amount of data we’ve, but it comes down to consumers being willing to share their information and then so, we’re very conservative in our approach as to how data is being used. If we work in conjunction with consumers, we’ll be able to give them enhanced services or better capability sets and exchange for using their data, how they’d like to see use, we think that there’s a number of huge business opportunities for AT&T and you will see us do a lot more as we go forward in the space.
Chetan Sharma 13:31
Let’s talk a bit about the EDO or the Emerging Devices Organization itself because I think it’s it has been almost five years now, since it was queried and at that time it was not clear how or which direction it might go, but as I’ve travelled the globe working with various operators it seems like, various operators have just struggling with making a transaction to executing in different areas that they were not accustomed to. So, how has EDO shaped AT&T in launching new businesses and what’s the execution model where EDO why it has been successful because now it’s north of a billion dollars?
Chris Penrose 14:12
So, what’s really exciting is about, like you said five years ago there was a decision made to form this new organization of emerging devices and the whole purpose of doing that was to create a standalone business unit inside AT&T they could operate and think very differently and drive innovation for the business and so we’ve been really successful bringing in all the right piece parts and they are very confined group to allow us to go and do different things and talk to anyone around the world where there somebody creating something in a garage, they’re companies around the planet to try to bring connectivity and new business models to bear and based upon us doing that in emerging devices, we’ve turned around and use that same model across the number of other startups we’ve done just recently, so there’s a life which are home security in automation business was structured in a similar way where we’ve set them up as a totally separate unit inside AT&T that has everything they need to do to run their business, we’ve the support of the larger AT&T operation if we needed, but these organizations were set up to run standalone. We’ve done the same thing with the AIO Wireless which was our new repaid business that was designed to go after and target a segment that we really do not feel that we’re competing in as effectively under the AT&T brand and so that’s the great example of how we’ve used this structure time and time again inside the company to drive and then march new businesses and we see it only continuing as we get forward.
Chetan Sharma 15:30
Are there some parameters that you look for in terms of going in going out there’s a life for connected cars that has satisfied certain requirement before you go into that opportunity?
Chris Penrose 15:39
We’ve got really smart wherever we’re going and chasing, so we look at every single opportunity out there and we decide as this is a space that we believe we can go and make an impact and in the case of digital life for instance, we do a lot of research in the space and we knew only 20% of the homes actually had a security service and 1% of the homes had any type of home automation and they really hadn’t been of lot of evolution in that space with regard to all the wireless capabilities sets that were out there today and it was also very fragmented business. So, we use all that criteria to say this is something we really believed in, was going to be a big opportunity for us and we’re very excited about the progress we’re making so far in the space.
Chetan Sharma 16:22
So, clearly lot of exiting stuff going on, things look quite green as far as you can see what could go wrong? What keeps you up at night?
Chris Penrose 16:31
What keeps me up night is probably not gone fast enough. There’s so much opportunity out there and in this really harnessing, all of the opportunity that is there making sure prioritizing and working on the things that really have the biggest opportunity for success. We moved a lot as an organization and for we go back five years ago we’re out trying to preach the idea that everything should be connected and selling people in on that idea I think where we now move to is the fact that people get that, there’s a great value in connecting everything and so now had we prioritize and make sure we’re working on the right thing, is a really biggest opportunity for AT&T and hooking up with the right partners to able to deliver that for ourselves and for our customers.
Chetan Sharma 17:14
We’ve minute left, could you talk about the opportunities clearly you’re seeing and how does that impact the developer’s ecosystem? How should developers think about connected cars or healthcare or digital life, how do they get working on it especially the challenge being working with gross multiple operators?
Chris Penrose 17:31
So, I think lot developers focus has been on the application on Smartphones and tablets and I think we’ve to put together the right way that is easy to work with through API and STKs and environments where we can bring these together. We’ve one of the big name is AT&T is made is around our Foundry Network and the idea of, now we’ve four different foundries across the world where we can bring together and do fast pitches and drive rapid innovation together using our API and partnering up with your application partners to bring new things there and so as well as our overall [?] program that we have and every year– we have a number of people come together and we’re one of the largest App developer programs out there now. We’re really trying to engage with our community because the other day, we think this all about exposing everyone to the opportunity and then let’s some of the smartest and figure out how do you take this LTE connectivity and do amazing things with it and that’s what we want to do.
Chetan Sharma 18:32
Oh my connecting watch is telling me the time has run out, thanks a lot for insights, please join me thanking Chris from AT&T.
Chris Penrose 18:39
Thank you very much.