GM Update (credit to Brian for original): General Motors Corp. is in talks with Bell Atlantic Corp. to put cell phones in millions of new cars and trucks, part of the No. 1 automaker's strategy to link drivers to the Internet and generate revenue after a sale, people familiar with the plan said.
(ed. I'd say this is good news for Globalstar even if they are not part of the initial agreement. It's hard to imagine folks settling for a system like this that drops voice capabilities each time one drives out of a cell. The next logical step is to add satellite voice ability. In a car, the size of the handset is much less relevant and the cost is wrapped into the whole vehicle)
General Motors said today it will install as many as 1 million phones in vehicles this year but wouldn't say which telecommunications company it was talking to. An agreement with the No. 2 U.S. local phone company may come as early as next week, the people said. The companies declined to comment.
An alliance would advance GM's effort to offer online entertainment and personal services to motorists via its OnStar system, which uses satellites to track cars and cell technology for communication. The system gives GM a way to keep making money after a car leaves a dealer lot. America Online Inc., the biggest online service, this week agreed to help provide content.
The plan 'would effectively double the number of mobile Internet phones that are out there today,' said Mark Lowenstein, senior vice president at Boston-based market researcher Yankee Group. 'That's an awfully ambitious number, but on the other hand, they sell a lot of cars.'
The selection of Bell Atlantic would be a vote of confidence in the New York company, which unlike rivals AT&T Corp. and Sprint Corp.'s PCS Group is only now assembling its own national wireless network. 'A lot of this is a bet on the future,' Lowenstein said. GM shares, which rose 3 7/16 to 76 3/8 in New York Stock Exchange trading, have gained 11 percent in the past 52 weeks after it recovered from strikes in 1998. Shares of New York-based Bell Atlantic fell 1 61/64 to 56.
Splitting Fees
GM and its eventual partner would split a monthly fee for the service, said Mark Hogan, head of GM's Internet unit. OnStar could generate $40 a month in revenue per vehicle, and GM eventually plans to install the hardware for the service on almost all of the 9 million vehicles it makes annually, he said. 'You can imagine, if we develop a subscription fee for every car we make, what an opportunity it would be for us to increase the value of GM,' Chairman Jack Smith said in an interview. The wider base will give GM clout to drive down prices for cellular services and content. 'It can certainly be big if they do a good job on the service side and the pricing,' said Lehman Brothers Holdings Inc. analyst Nicholas Lobaccaro.
To succeed, GM's services will have to displace cell phones that millions of Americans already carry in glove compartments. That will be hard, but not impossible as safety concerns with hand-held cell phones grow, Lobaccaro said. U.S. highway safety regulators concluded in a 1998 report that the use of cellular phones probably increases the risk of automobile crashes.
OnStar Growth
GM started offering OnStar in late 1998 on all Cadillac Escalade sport-utility vehicles as a dealer-installed option. GM expects to install OnStar in 3 million vehicles in the next few years, up from 100,000 now.
[interesting question: Can Onstar satellite antennae be modified to allow reception of Globalstar calls?]
OnStar now lets drivers contact a 24-hour service center for directions or help in an emergency. Cadillac started offering an option this month in which the OnStar service center will place a cellular call to any phone designated by the driver with the touch of a single button, Cadillac spokesman Chris Preuss said.
'Like any other option, it will eventually trickle down to the entire lineup,' Smith said. Eventually, GM will link this service to a hand-held unit that drivers can carry with them when they leave the vehicle. All major automakers are scrambling to make sure drivers are as connected to global communications grids in their cars as they are in their homes and offices, Smith said. Ford Motor Co., the world's second-largest automaker, plans to make Internet access standard on some Lincoln cars starting on 2001 models.
'We want to make sure we have a chance to be the first mover,' Smith said. Some of the hardware for the new services might come from Delphi Automotive Systems Corp. or Motorola Inc., Smith said.
Bell Atlantic
The alliance with GM would come as Bell Atlantic is preparing to link its Northeast wireless properties with those of GTE Corp. in the Midwest and Vodafone AirTouch Plc's AirTouch Cellular unit in the West.
Bell Atlantic Mobile customers can place and receive calls outside the company's own service area, on other carriers' networks, but doing so costs them and the company more.
Bell Atlantic agreed to combine its U.S. wireless assets with those of Vodafone AirTouch in September. When Bell Atlantic's $81.7 billion purchase of GTE is completed, the company's wireless division will be the largest in the U.S., with about 22 million subscribers, Bell Atlantic said. Bell Atlantic said Monday it added 874,000 wireless customers in the fourth quarter, bringing its total to 7.7 million, as it completed the acquisition of Frontier Cellular and as shoppers snapped up digital cellular phones as holiday gifts.
Separately, General Motors will announce a marketing agreement with NetZero Inc. to reach more consumers through the Internet, according to a person familiar with the situation. NetZero provides free Internet access to people who agree to see online advertising. The agreement between GM and Westlake Village, California-based NetZero is a portal alliance through which the companies will market to each other's customers, said a person familiar with the plans.
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