Nokia navigation is free

What is the impact of Nokia’s decision to offer free turn-by-turn navigation with Ovi Maps?

• It is a logical move for Nokia, particularly in light of Google’s free navigation
• The announcement will not be universally welcomed by operators
• Navigation vendors will increasingly encounter consumer expectations that navigation should be free

On 21 January 2010, Nokia announced that it is to make turn-by-turn navigation free with its Ovi Maps offering. Initially the functionality will be available on 10 of its S60 smart phones, but it will soon be pre-installed on devices throughout Nokia’s S60 and Maemo smart phone portfolios. Customers will have access to unlimited navigation across 74 countries and in 46 languages, for the entire lifetimes of the products. Though the mapping element has always been free, recent Nokia handsets have often also been bundled with a free period of turn-by-turn ‘driving navigation’, varying significantly in duration by device, operator and geography. But the business strategy up to now has essentially involved trying to encourage customers to continue to use navigation beyond their bundled free period by purchasing a one-day, 30-day or one-year licence, or a rolling monthly subscription, to cover a specific region or group of countries. For the most expensive region, Europe, a year-long licence for driving navigation was priced at €59.99 ($84), or €7.99 ($11) for one month, or €1.99 ($2.80) for one day. Nokia will now remove these charges and the geographic restriction of the licence to allow unlimited usage ‘globally’.

The move is a logical one for Nokia to take, especially in light of the recent launch of Google’s free navigation solution that currently supports only Android devices and is confined to the United States - though Canalys expects both of these limitations to be addressed this year. As Google’s free solution becomes more widely available, it will inevitably have a negative impact on consumers’ willingness to pay for navigation, making it increasingly hard for application providers to charge for their solutions. Yet Nokia’s move should be viewed less as a defensive measure and more as it going on the offensive. It already has the necessary assets in-house, with its own navigation software, ownership of Navteq, and a huge, growing installed base of GPS-integrated smart phones. In making its own solution free now, it has a head start over Google and any other vendor that follows in every supported market except the US, giving it time to firmly associate itself with the concept of free navigation through promotional activity. Canalys’ end-user research has repeatedly shown that navigation is a feature that consumers want on their mobile phones. Being the first to make global navigation free across so wide a portfolio of devices will give Nokia handsets a true value-add and help it differentiate its products in the increasingly competitive smart phone space. Crucially though, the message will need to be communicated loud and clear to consumers to realize these benefits. The out-of-box experience and first-time use will also be key in this regard – whether car-cradles are included in the box, the clarity of the literature about the navigation solution that’s included, and whether issues such as how to pre-load additional map content from a PC are sufficiently explained, will all influence the likelihood of consumers trying out and using the Ovi navigation solution, and from there perhaps, other Ovi services.

Nokia’s free navigation announcement will not be welcomed though by all its mobile operator partners. While some are happy to endorse or support services that help encourage data consumption, many offer chargeable GPS navigation services themselves, albeit with varying success outside the US, and may well be reluctant to support a move that encourages consumers to expect navigation and other mobile content and services for free, eroding potential revenue streams. Vodafone, particularly, may have reservations having recently invested in establishing its own suite of mobile applications and services, dubbed 360, of which navigation is a key component, based on its acquisition of Wayfinder at the beginning of 2009. This announcement may conceivably push more operators into partnerships with third-party navigation solution providers, where navigation is bundled with the cost of a data plan, providing their own effectively free navigation solutions with an incentive for customers to sign up to data plans, while maintaining customer ownership advantages.

Similarly, handset competitors may consider entering into deeper, closer relationships with selected navigation software vendors to offer their own bundled or free solutions. This would minimize Nokia’s ability to use navigation as a differentiator and enable them to also take advantage of the growing consumer appetite for, and expectation of, having free navigation available on smart phones out-of-the-box. As such, this announcement is mixed news for the many competing phone-based navigation solution providers in the market. That it may prompt operators and some of Nokia’s competitors to pay more attention to their own navigation partner relationships and potentially engage in new ones – or even make acquisitions if the fit is right – is undoubtedly positive. Moreover, many solution providers already had little expectation of selling solutions to Nokia customers in any case, given Nokia’s history of pre-installing its own solution, typically with a free use period. As such, many already do not support the S60 platform, and so they will be shielded to some extent from the direct impact of this announcement. But Nokia devices account for nearly 40% of smart phone shipments worldwide and to have Nokia customers even more likely to be out of reach will be unsettling, especially with a further and growing platform, Android, likely to have its own pre-installed free solution in the near future, beyond the US. But the most significant impact for navigation vendors will likely be the effect that a widespread Nokia advertising campaign will have on consumers and their willingness to pay for navigation. All providers will come under substantial pressure to reduce prices, and few consumers will be happy to pay the kind of prices that vendors such as TomTom or Navigon are currently able to command through application stores.

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