By now, consumers were supposed to be tooling down the highway, surfing the web, retrieving and composing e-mails, and talking to their dashboards, all with hands-on-wheel and eyes-on-the-road detachment. And the multitude of telematics businesses—suppliers of components, devices, software and services—were supposed to be laboring around the clock, struggling to keep up with soaring consumer demand. At some time after 2000, however, the wheels came off the grand vision for the Internet in vehicles.

So now, it's all but finished. All we need do is sweep the telematics market under the carpet with the rest of the failed businesses from the dot.com boom, right?

Wrong. Telematics isn't dead; it's just taking a nap.

Industry experts acknowledge that automakers have backed away from portions of that grand vision. In particular, they say, automotive executives are keeping the "Internet on wheels" concept at arm's length. But other portions of the purported telematics boom are alive and well. Many automakers, for example, are revving up plans for Bluetooth-equipped phones in their vehicles. Others are pursuing various wireless concepts for in-vehicle navigation. And General Motors hasn't budged on its support of its OnStar Division, despite reports that the division is struggling financially.

Moreover, analysts argue that opportunities for telematics may still be plentiful.

"The last two years, car manufacturers have become very pessimistic about opportunities for telematics," notes Thilo Koslowski, lead automotive analyst and director of Gartner G2. "But what we are seeing now is an overreaction. They're afraid, and they're not really looking at the true potential of telematics." Koslowski and others in the industry believe, for example, that the commodity nature of cell phones will force all automakers to deal with wireless connectivity issues. Beyond that, they believe that automakers will ultimately be forced to reckon with the consumer's insatiable appetite for new forms of entertainment.

"In the past, car manufacturers have viewed the vehicle as the center of the universe," Koslowski says. "In the future, they're going to have to allow consumers to connect their MP3 players and their personal DVD devices. They're going to have to tailor their vehicles to the devices, not the other way around."

Boom and bust
To comprehend the new vision for telematics, however, it's first necessary to run through telematics' resume, take a peek at where it went wrong, and then offer some potential scenarios in which it could thrive.

Automotive electronics experts agree that telematics met its Waterloo when the vision for it became confused with that of the personal computer. Amid the surrounding hype was talk of web surfing and e-mail. Marketers spun a future vision of an office on wheels, with drivers using text-to-speech to listen to e-mails, then employing speech-to-text to compose their own electronic messages. Wingcast LLC, the failed telematics effort backed by Ford and Qualcomm, went so far as to create videos showing how the company's service would help business executives, harried parents, and even surfers. One video showed how Wingcast's technology could inform a beach boy that the surf was up, so he could get to the ocean on time. "Everybody thought the mobile Internet was the next gold rush," says Robert Schumacher, director of the mobile multimedia business group at Delphi Delco Electronics Systems. "But the problem is that people's paradigm of the Internet is sitting in front of a keyboard, downloading rich pages of multimedia information."

The Internet confusion affected telematics in two ways. Marketers offered prospects of office-like cars and consumers scratched their heads, wondering why they would ever want to surf the net and download rich multimedia information while they drove.

As a result, hope for telematics plunged. Ford pulled the plug on Wingcast, and Cadillac shelved its much-publicized Cadillac Infotainment System. Worse, a comprehensive study by The Hansen Report on Automotive Electronics of the in-car communications business warned that telematics success might be as much as eight years away. It even suggested that GM's OnStar Division was struggling to convince consumers to renew their subscriptions. Suddenly, telematics evolved from being a hot vision of the future to being a dead-on-arrival concept from the dot.com days.

"The problem was, nobody could put a business deal together that made any sense," says Hansen Report Publisher Paul Hansen. "When Wingcast bailed out, leaving unpaid creditors in their wake, it became emblematic of everything that was wrong with telematics. What made it so bad was that Ford executives had publicly said telematics was going to be big, and now here they were bailing out."

Indeed, Ford's retreat was viewed by many as the straw that broke the camel's back.

"People who are very, very highly-placed in the auto industry still say they don't see telematics taking off in North America or Europe any time soon."