The Wall Street Journal-20080114-Who Keeps Digital Maps Going in Right Direction-
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Who Keeps Digital Maps Going in Right Direction?
One morning last summer, Guy Vitale hopped in his Toyota SUV in Toledo, Ohio, and set a course for the kind of trouble most drivers avoid, a major construction project on I-280.
Along the way, he carefully entered into a Panasonic laptop mounted on his dashboard the new bridge across the Maumee River, the new on- ramps that will serve it and each and every street sign. All of those notations would make what once was lost, soon be found.
Mr. Vitale is one of the foot soldiers of digital mapmaking. He works for Netherlands-based Tele Atlas NV, one of only two companies -- the other being Chicago-based Navteq Corp. -- responsible for supplying data to all digital mapping services. Their information powers online services like Google Maps as well as navigation systems in cars and mobile devices that give directions by using a network of satellites known as the Global Positioning System.
That market is growing quickly as GPS devices become more affordable and offer not just basic navigation, but traffic updates, fuel prices and tools for people to track each other's whereabouts. The industry is expected to reach $12 billion by 2010, according to research firm iSuppli. As a result, digital mapping data is in high demand and Tele Atlas and Navteq have become hot commodities. In October, Nokia Corp. struck a deal to buy Navteq for an eye-popping $8.1 billion, with plans to use maps as a cornerstone for selling ads tied to a cellphone user's location. A month later portable GPS device-maker TomTom NV beat out rival Garmin Ltd. in a bidding war for Tele Atlas, with a $4.2 billion offer.
Neither bid could be justified by the financial performance of the companies -- Navteq is modestly profitable while Tele Atlas is losing money -- but analysts say the buyers were willing to pay a "strategic premium" because of the value of mapping data to all players in the GPS industry. Now investors and regulators are raising questions about the implications of the two deals. The European Commission, scrutinizing the Tele Atlas acquisition, says it is concerned TomTom might be able to hurt its competitors by raising prices or limiting access to the Tele Atlas database. The regulator hasn't yet begun a review of the Nokia transaction.
Worries about Garmin's ability to compete have helped send the company's shares down nearly 40% since late October. "There's a feeling that this is a key strategic asset and without ownership of it you are doomed in the map space," said Rich Valera, a wireless analyst at Needham & Co. But he argues those fears may be exaggerated, noting Garmin struck a licensing deal to use Navteq's data after pulling its bid for Tele Atlas. "The whole obsession with owning the maps is probably overstated," he said. Needham & Co. makes a market in Garmin.
In an interview a few weeks after TomTom announced its acquisition last summer, Tele Atlas founder and CEO Alain de Taeye said concerns that TomTom would abuse its market position were "nonsense." He said the merger would benefit consumers, ushering in a new era in which individual users will be able to tweak underlying maps to fix errors and add "points of interest" they find important -- a local high school, a restaurant, or even their home. His goal is to create a user-generated database of mapping information accessible to all users of GPS devices -- kind of a "GPS Internet," he says. (There are already several similar efforts underway, such as the nonprofit OpenStreetMap project, but they don't have access to Tele Atlas's breadth of basic mapping data.) And he said Tele Atlas would continue to make new features available to all of its partners, such as new three-dimensional city maps that provide real-life graphic renderings of building facades and landmarks. Tele Atlas announced at last week's Consumer Electronics Show in Las Vegas that those 3D maps would soon be available in North American cities including New York, Toronto and Los Angeles.
"We say to customers, if you walk, we won't stop you, but look what you're walking away from," Mr. de Taeye said.
Tele Atlas and Navteq spent more than two decades building databases of information that the European Commission now call a "duopoly market for navigable digital maps." To get an idea of how hard it would be for a new entrant in the business, consider their process: The companies dispatch hundreds of field personnel around the world to drive millions of miles of roads at slow speeds and log every detail, from major landmarks to speed-limits and one-way streets. Both companies combine those data with other sources like aerial photos and satellite imagery.
Tele Atlas has personnel who troll the Web and search municipal ordinances to look for clues about highway construction and new street names. It's a global effort: Tele Atlas's database covers 14.6 million miles in 64 countries -- but the company gets some help overseas. In far-flung places, it enlists the help of locals who already drive the roads -- such as bus drivers in Mexico -- to help gather data. In China, where the government believes it would be a national security threat to allow a foreign company to map its territory, Tele Atlas has a local partner. (It is required by the government to scramble some map details so they aren't entirely accurate.)
Tele Atlas's maps are used by a long list of clients, including Internet companies such as Google Inc. and Microsoft Corp., and portable navigation device makers Mio Technology and Dash Inc. It falls to people like Mr. Vitale to make sure those maps stay updated and accurate. Mr. Vitale, a former U.S. Census bureau employee, has the task of charting the terrain of Michigan as well as parts of Ohio. Sometimes existing maps just need tweaks, but in the fast growing northern suburbs of Detroit, there are plenty of new neighborhoods to map out.
Recently, he was surveying Wayne County, driving all the local roads slowly in both directions to track everything from the speed limits to whether the ground underneath his vehicle was asphalt, dirt, or concrete. When he wanted to make changes to the Tele Atlas database, he had to pull over on the street or into a parking lot. "If you try to enter it at a red light and it changes green, you end up rushing and it makes for bad data," he says.
Mr. Vitale says his job is never done. "The goal is to make the data match reality 100%," he says. "That's unrealistic, because the ground reality is always changing, but we try to keep up."
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Cassell Bryan-Low contributed to this article.
