Crafting a Policy Framework
It is not surprising that the study findings delivered two months later by the National Association of Public Administration and the National Research Council included in capital letters the plea, “THE UNITED STATES NEEDS A NATIONAL STRATEGY FOR GPS. ”67 The NAPA/NRC study recommended that the president adopt specific national goals and create an executive board to implement them. Similarly, the RAND study suggested a presidential decision directive, a type of executive order, as the policy-making framework. The two studies’ conclusions and recommendations had more in common than they differed. Both stipulated the priority of national security but saw great risks in failing to engage international users and manufacturers. Of the top eleven companies holding international patent rights for GPS products in 1994, four were Japanese and one was French. All were well-known names: Pioneer Electronic, Motorola, Mitsubishi Denki KK, Caterpillar, Trimble Navigation, Hughes Aircraft, ITT, Magnavox, Nissan Motor KK, Sony, and Thomson CSF.68 Both studies emphasized maintaining U.S. leadership in satellite navigation systems and advancing GPS as the internationally accepted standard. That required minimizing barriers to trade, broadening civilian participation in policy making, and continuing to provide GPS free of direct user fees. However, neither study saw an alternative to keeping GPS—the space and ground segments—under military control, both for security reasons and because of the need for stable funding. The user segment—receivers, applications, and services—was already “effectively in the hands of the private sector ,” the RAND study noted.69
Both studies offered eye-catching market projections for GPS equipment sales. The RAND study cited a U.S. GPS Industry Council estimate of 50 percent annual growth that would carry worldwide sales from $510 million in 1993 to $8.47 billion in 2000.70 Car navigation devices and GPS-equipped computers and mobile phones accounted for more than 60 percent of that total, while military sales represented just 1 percent. The NAPA/NRC study surveyed seventy-nine companies and arrived at an even more optimistic forecast, projecting that an estimated $2 billion global market in 1995 would grow to at least $11 billion by 2000 and $31 billion by 2005.71 One chart in the NAPA/NRC study suggested that turning off Selective Availability could significantly boost commercial growth.
The two sets of recommendations differed most over the contentious policy of degrading the civilian signal. The NAPA/NRC study recommended turning off Selective Availability immediately and deactivating it after three years. It based this recommendation on economic projections, on the fact that continuing to degrade the signal hindered international adoption of GPS, and on impending competition from Russia’s nearly complete GLONASS system, which lacked the security feature, giving users a more accurate signal.
The RAND study took a more cautious approach, concluding that commercial GPS growth depended more on declining prices than better accuracy. It argued against turning off Selective Availability until the Pentagon was certain the military had developed effective countermeasures both to deny civilian GPS and GLONASS signals to adversaries during hostilities and to ensure its own ability to acquire and use the military signal in an environment where signals are being jammed. Even if were turned off during peacetime, RAND recommended retaining Selective Availability as a wartime option.
Both studies acknowledged that differential augmentation techniques were rapidly eroding the rationale for Selective Availability and recommended that the Department of Defense shift its focus to better offensive and defensive electronic countermeasures. The military needed to end its reliance on civilian receivers (a holdover from Desert Storm) and develop new receivers that could lock onto the encrypted military signal without first using the civilian signal to acquire satellites, a shortcoming that would prevent jamming the civilian signal to deny it to adversaries. The NRC also recommended adding a second civilian signal, expanding and upgrading the monitoring stations and creating a backup master control station.
When President Clinton issued Presidential Decision Directive, National Science and Technology Council 6 (PDD NSTC-6) on March 28, 1996, it combined elements of both studies. The directive created a “permanent interagency GPS Executive Board, jointly chaired by the Departments of Defense and Transportation ” and committed the nation to providing GPS “for peaceful civil, commercial and scientific use on a continuous worldwide basis, free of direct user fees. ”72 It charged the Defense Department with continuing to “acquire, operate, and maintain ” GPS, designated the Transportation Department as the lead agency “for all federal civil GPS matters ,” and charged the Department of State with coordinating bilateral or multilateral agreements involving GPS. The National Command Authorities (president and secretary of defense) retained ultimate control of GPS and any government augmentation systems. Most notably, the directive announced the intention to discontinue Selective Availability within a decade and committed the president, beginning in 2000, to make an annual determination about the continued need for it based on input from the various agencies.
At a press conference the next day Vice President Al Gore compared the government-sponsored origin and private sector potential of GPS to that of the Internet. He promised one hundred thousand new high-tech jobs soon and, eventually, the development of handheld phones that could provide precise location information and allow civilian “rescues ” similar to Scott O’Grady’s. Gore went further than the official text of the president’s directive, telling the audience to expect a more accurate civilian signal in “four to ten years. ”73 His time frame for the demise of Selective Availability proved accurate, and his prognostication about GPS-enabled phones with navigation capabilities was correct, although that advance was more than a decade away.
Four months after the president issued the directive the FAA awarded a $475 million contract for WAAS to a consortium led by Wilcox Electric, a Northrop subsidiary, but the project soon gained a reputation as a troubled program.74 Within a year the FAA fired Wilcox and gave the contract to Wilcox subcontractor Hughes Aircraft (acquired in 1998 by Raytheon).75 By late 1997 the program was under fire in Congress. Business & Commercial Aviation reporter Perry Bradley summed up the situation this way: “WAAS has all the hallmarks of a major FAA program: sweeping scope, high technology, contract disputes, allegations of mismanagement, questions about capabilities, congressional posturing, a slipping schedule and a growing budget. ”76 Development continued, but the goal of GPS as a “sole means ” navigation system for all phases of flight through landings gradually succumbed to concerns about signal interference, jamming, and the need for backup systems. Many ground-based beacons remain today. When the FAA activated WAAS on July 10, 2003, it had spent nearly $3 billion on a system that took so long to construct, some of the regional airlines questioned whether newer technologies might eclipse it.77 The FAA soldiered on. Five years later the number of certified, published WAAS approaches, 1,333, surpassed traditional instrument landing approaches, and the number reached 2,300 in 2010.78 WAAS remains a cornerstone of the FAA’s “NextGen ” overhaul of the National Airspace System, aimed at using technology to save fuel and time, accommodate more traffic, and improve safety. WAAS also provides enhanced GPS accuracy, availability, and integrity for a wide variety of nonaviation users in agriculture, surveying, and surface transportation and is a key example of national infrastructure enabled by and dependent on GPS.
In 1999 the Department of Transportation entered a multiagency partnership with the Coast Guard to add an inland component to the maritime DGPS network, creating the Nationwide DGPS (NDGPS) program.79 Apart from early criticism that it was redundant with WAAS, this expansion avoided the controversy of its FAA cousin.80 More than eighty NDGPS radio-beacon sites cover 92 percent of the continental United States, providing enhanced navigational accuracy for surface transportation in addition to maritime needs.81
Expanding Consumer Markets
President Clinton’s directive included an explicit goal to “encourage private sector investment in and use
of U.S. GPS technologies and services. ” Because GPS originated in the U.S. military, defense contractors and domestic manufacturers had a head start in the marketplace. However, when eight Japanese companies established the Japan GPS Council in 1992, the group grew to seventy-two corporate members by the end of that year.82 Estimates put the Japanese market at about half the size of the U.S. market, but it was growing fast, particularly the car navigation segment.83
Among U.S. manufacturers, Rockwell International, the key government contractor from the outset of the GPS program, saw the commercial portion of its GPS technology sales rise to 25 percent by 1994.84 In 1997 Magellan Systems, which created the first commercial handheld GPS receiver in 1989 and supplied the NAV 1000 to Desert Storm troops, bought Rockwell’s vehicle navigation business. Eight thousand Hertz rental cars already featured Rockwell’s PathMaster GPS system (under the “NeverLost ” label), and the company marketed it widely to other rental fleets, public safety agencies, utility companies, real estate and sales professionals, and private vehicle owners.85 The purchase positioned Magellan as a leader in the worldwide vehicle navigation market, projected to grow from $1.1 billion to more than $3 billion by 2000.86 Magellan, founded in 1986 in San Dimas, California, as a privately held company, prospered during and after the Persian Gulf War and enjoyed such strong sales in Europe that it established a wholly owned subsidiary in England in December 1991.87 Magellan made GPS products for commercial boating, outdoor recreation, the military, surveying, oil and gas exploration, and forestry and made components for original equipment manufacturers of systems such as autopilots and vehicle tracking.88 The company proved attractive to investors. Orbital Sciences, a Virginia-based rocket and space systems manufacturer, bought Magellan in 1994 for $50 million and sold it to Thales Navigation of France for $70 million in 2001. A private equity fund, Shah Capital Partners, acquired Thales in 2006 for $170 million and sold Magellan’s Consumer Products Division to MiTAC International, a corporation listed on the Taiwan Stock Exchange, for an undisclosed amount in 2008. Throughout, Magellan, headquartered in Santa Clara, California, has remained a top consumer brand recognized for low-cost GPS units for automobiles and recreational use.
Trimble Navigation, the Silicon Valley supplier of those “green position locators ” to soldiers, emerged from Desert Storm a big winner. Charles Trimble, a Hewlett Packard executive, and two partners from Hewlett Packard founded the company in 1978, the same year the first Block I GPS satellite launched.89 Their original focus was high-end navigation systems for boating using Loran, a ground-based radio-navigation system primarily for maritime users. As the GPS constellation grew and the luxury yacht market declined in the mid- to late 1980s, Trimble shifted his business to GPS products for scientific research, surveying, and other commercial applications. Trimble sold three million shares of stock on the NASDAQ exchange in 1990, becoming the first publicly traded GPS company.90 From 1990 to 1991 Trimble’s sales more than doubled, to $151 million from $63 million, and profits more than tripled, to $7 million from $2 million.91 Revenues came back down to earth following the war, but Trimble continued diversifying its products and customer base and became a leader in developing real-time kinematics (continuously updated GPS while moving), “plug and play ” GPS sensors for laptops or digital devices, and GPS integrated with cellular communications circuitry and other manufacturer’s central processing units. Early on Trimble expanded GPS technology applications through partnerships with companies like Caterpillar and Nikon, but after 2003 it increasingly acquired smaller companies to broaden its reach across diverse markets. The company has focused on integrated solutions rather than boxed products. By 2012 Trimble’s revenues exceeded $1.2 billion, it had extensive international operations, and it offered more than five hundred products for use in agriculture, construction, communications, engineering, mapping, surveying, and precise timing.92
In the United States GPS car navigation remained confined mostly to professional users and private luxury automobile owners until after 2000. By that time, improved signal accuracy had attracted more players to the industry, and declining prices finally opened a mass market for standalone personal navigation devices sold through consumer electronics retailers. The era of suction-cup-mounted GPS units with cigarette-lighter cords had arrived. Leading makers of in-dash car audio systems jumped into the fray, along with companies rooted in GPS. The Consumer Electronics Association reported $32.8 million in U.S. sales of aftermarket navigation products during the first three quarters of 2003, a 33 percent increase over the same period in 2002.93 Magellan introduced one of the first 3.5-inch touch screen units with built-in street-level maps, points of interest, and turn-by-turn directions—at a retail price of $1,299.94
In 2004 “mobile navigation ” made its first appearance as a separate heading in NPD Group’s “Market Share Reports by Category ,” an annual report compiled by the Port Washington, New York, market research company.95 NPD uses point-of-sale data from selected retailers to track a broad array of consumer electronics. The company put the U.S. mobile navigation category total at $72.8 million and reported that the top five ranked brands—Magellan, Garmin, Pioneer, Alpine, and Kenwood—captured 95.4 percent of the market.96 Prices for portable car navigation devices dipped below $500 in 2004, while the industry shipped an estimated sixty thousand in-car units, more than doubling the previous year’s shipments.97 Also in 2004 the first nationwide traffic alerts system to guide commuters around tie-ups arrived via XM satellite radio’s NavTraffic service, incorporated into Pioneer and Alpine units.98 Mobile navigation sales rose in 2005 to $114.9 million, and the top five brands continued to hold 95 percent of the market.99 However, Garmin moved ahead of Magellan to claim the top ranking, and a new brand joined the list, which now read Garmin, Magellan, Pioneer, TomTom, and Alpine.100 While Garmin boasted the largest market share in the United States, Amsterdam-based TomTom, with the largest share of the European market, claimed the worldwide lead.
A quick overview of these two GPS heavyweights is in order.
Garmin’s founders, Gary L. Burrell and Dr. Min H. Kao, formed the company in 1989 to take advantage of the revolution they saw GPS bringing to navigation.101 Both had worked for major technology companies, including Allied Signal, where Kao led development of the first GPS navigator certified by the FAA.102 When the company went public in December 2000, it had worldwide annual revenues of $345 million, production facilities in Kansas and Taiwan, and extensive product lines serving the aviation, automotive, marine, and recreational markets.103 After claiming the top U.S. market share in PNDs in 2005, Garmin remained the leader through 2012, when it reported $2.72 billion in total revenue and sold more than fifteen million units worldwide.104 However, that was 22 percent below its best year, 2008, when it achieved $3.49 billion in revenue.105
TomTom, founded in 1991, initially focused on developing software for mobile devices such as handheld barcode scanners for businesses and personal digital assistants (PDAs) for individuals.106 It launched its first navigation application for PDAs in 2002 and its first standalone PND in 2004. PND sales jumped from a quarter-million units in 2004 to 1.7 million in 2005, when the company went public. It then acquired a German company, Datafactory, which specialized in vehicle telematics (information technology across long distances), giving TomTom entrée into fleet management services. Two years later TomTom acquired an automotive engineering division of Siemens and one of the two largest global mapping companies, Tele Atlas, to position itself for entry into the in-dash navigation market. TomTom reported €1.1 billion in total revenue in 2012, a 17 percent annual decline due to lower PND sales and 36 percent below its best year, 2007, when it achieved €1.74 billion in revenue.
By 2006 the top three brands—Garmin, TomTom, and Magellan—commanded 85 percent of the U.S market, with Garmin alone accounting for nearly half.107 New suppliers and new products poured into the marketplace, with entrants like long-established mapmaker Rand McNally hoping to capture part of an
estimated three-million-unit North American market.108 The number of PND units shipped in 2006 increased nearly seven-fold over the prior year, while total revenues grew 262 percent, despite falling prices.109 At the annual Consumer Electronics Show in January 2008, low-end units started at $199 or less, and vendors sought to maintain their profit margins and differentiate their new PNDs by offering larger screens, voice input of addresses, and real-time traffic and weather options.110 Final 2007 figures showed North American shipments grew to 8 million units and worldwide units shipped reached 34.8 million.111 Garmin, maintaining its hold on 47 percent of the U.S. market and doubling its European shipments, edged past TomTom in 2007 as the world leader, according to Canalys, a market intelligence consultant to the high-tech and telecom industry.112
During 2008 and 2009 two forces converged to disrupt skyrocketing PND sales—a financial panic that caused a deep recession and the rise of inexpensive or free GPS applications for smartphones. The prospect of smartphones as competitors to PNDs had loomed on the horizon for some time, but technical limitations kept phones from delivering the same functionality. Cell phones began to get “smarter ” around 1999 as manufacturers found ways to combine them with PDAs. Integrating contact lists and meeting schedules into the phone itself was a natural marriage, since the same customers used both and disliked carrying separate devices. Motorola was first that year with a credit-card-size device called the Clip-On Organizer, which snapped onto the back of the StarTAC phone, enabling automatic dialing and syncing via a cable to a personal computer.113 As carriers improved data transmission capabilities to handle mobile e-mail volume, using phones to access the Internet became more common. Search engine leader Google began offering its Google Local service— Internet searches tailored to nearby points of interest—to Java-enhanced cell phones in 2005, but screen sizes remained a drawback. Trying to hold a 1-by-1.5-inch screen close enough to read a map while driving was “a moving violation in the making ,” observed reviewer Dawn C. Chmielewski in the San Jose Mercury News.114 Screen sizes and Internet connectivity continued to grow. Apple introduced the iPhone on June 29, 2007, in an exclusive deal with AT&T that limited distribution to Apple’s stores and the telecom’s 1,800 retail outlets and direct mail operations.115 Consumers nevertheless purchased more than 1.3 million iPhones over the next three months, making it AT&T’s top-selling phone and the fourth-best selling in the industry.116 In July 2008 Apple launched the iPhone 3G and a software upgrade enabling real-time GPS mapping and navigation through applications downloaded from its online App Store. Apple soon claimed the number-two spot behind Research in Motion, maker of the Blackberry, and smartphone revenues increased by 71 percent between July 2007 and July 2008 even as overall cellular revenues declined.117 Analysts estimated that smartphones accounted for 19 percent of all handset sales in 2008, compared to 9 percent the year before.118 Third-party applications for smartphones, including GPS navigation apps from companies such as Garmin and TomTom, proliferated. Industry watcher iSuppli counted more than three thousand navigation-related apps in Apple’s App Store by mid-2009.119 Inrix Traffic, a free app introduced in August 2009, turned its users into data generators by tracking the location and speed of their phones to create the first “crowd-sourced ” traffic reports.120 GPS capability in smartphones enabled users not only to navigate from one point to another but also to receive notices that a friend, favored retailer, or other point of interest was in the vicinity. The term location-based service, or LBS, entered the mainstream lexicon, and an ABI Research analyst described the segment as experiencing “nothing short of a gold rush. ”121
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