Tuesday, May 26, 2009 – Stewart Wolpin
It's been reported that the U.S. GPS satellite constellation, maintained by the U.S. Air Force, is in danger of failure next year. While the author of said report exhibits a Chicken Little attitude toward the GPS guardians, it's hard to believe responsible parties would allow such a catastrophe to befall not only national security but to a critical consumer market.
How critical? CEA says in 2009, 17.4 million portable and transportable GPS navigation devices – in English that's GPS handhelds (Personal Navigation Devices (PNDs)) from folks like Garmin, Magellan and TomTom, as well as car-based GPS navigation systems – will be sold, more than twice as many as were sold just two years ago (8.75 million). According to CEA, GPS gadgets will be a $4-plus billion business this year.
Big business, right?
The Real GPS Business
Wrong. As the kids would say, BFD. This whole PND bubble may soon burst, even with a healthy economy and a healthy GPS satellite system.
Why? PNDs and car navigation systems represent a tiny fraction of the actual GPS navigation device market. Consumers are suddenly realizing their cellphone makes a better PND than a PND.
First, the statistical argument to support the first assertion.
Firm figures are hard to come by, but most if not all 3G smartphones include GPS capabilities (and most, if not all, new smartphones are 3G enabled), supported by subscription navigation services offered by Verizon, Sprint and AT&T.
According to our forecast, nearly 160 million smartphones were sold worldwide last year. Apple has sold more than 15 million iPhones, which may be more units than any single PND supplier, and which require no added GPS subscription – essentially, you get a free PND with every iPhone.
This also doesn't include 3G phones that aren't smart but still include GPS capabilities. AT&T says most if not all its 3G devices will include GPS capabilities this year, Verizon reports "most of our new feature phones and many smartphones (RIM, Windows Mobile devices) are VZ Nav[igator]-capable" and most of Sprint's phones are 3G/Sprint Navigation capable.
DTC estimates about 200 million cellphones will be sold in the U.S. in 2009, and about 91 million of these will be 3G.
Sort of makes those 17.4 million PNDs look as insignificant as an ant hill next to the Empire State Building, doesn't it?
It Makes A Nice PND
Now, to the second assertion – why cellphones are better PNDs than PNDs. Two reasons.
First, cellphones don't rely just on the GPS satellite system. Cellphones actually are equipped with assisted GPS (A-GPS), which means they use the cell network to assist the GPS system in locating you. A-GPS also means your location can be acquired in half the time than using just GPS, even indoors when your phone can't "see" the GPS satellites.
Second, cellphones are connected. Unlike most PNDs, cellphones can receive live traffic updates and up-to-date POIs (Points of Interest), including where to find the cheapest gas at any particular moment. And it could also mean that advertisers know where you’re located, which may not be a plus.
Yes, cell-based navigation services run around $10 a month (except for iPhone), but it'd take around three years before these fees would equal the price of a standalone – and not as well-endowed – PND.
So, why in this economy would a consumer with a GPS-equipped cellphone buy an additional slow, dumb traditional PND?
GPS satellites may come and go – but the halcyon days of the PND may already have come and gone.
