Carolina Pinart, Daniel GarcíaNetworked Vehicles DivisionTELEFÓNICA I+DNovember 5, 2008

© 2008 Telefónica Investigación y Desarrollo, S.A. Unipersonal

Telefónica Research and DevelopmentThe Connected Car initiative – A focus on services

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Part I – Part I – Innovation in Telefónica – The Connected Car (C. Innovation in Telefónica – The Connected Car (C. Pinart)Pinart)

01 The Telefónica Group: a solid leader in the telco industry

02 Telefónica R&D: Telefónica’s research and development unit

03 What is the Connected Car?

- The concept

- Behind the Connected Car: the Networked Vehicles Division

- The three pillars of the Connected Car

Part II – Part II – Developing services for the Connected Car (D. Developing services for the Connected Car (D. García)García)

04 Services for the Connected Car

05 Starting up: what, who, when, where, how

06 Building a framework: setting up the enabling technologies through innovation

07 Getting to the market: product ideas, testbeds and trials

Index

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The Telefónica Group: a solid

leader in the telco industry

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Telefónica is a benchmark for the worldwide Telco sector nowadays …

More than 240,000 professionals**

219 Mill. accesses (as of Sep’07)

• 86.1 Mill. in Europe• 126.5 Mill. in Latin America• 6 Mill. in other markets

Revenues (9M07): € 42.0 bn (+8.6% vs 9M06)

Net Income* (9M07): € 7.8 bn (+ 51.0% vs 9M06)

Integrated ICT solutions provider for all customer segments

One of the 50 largest companies in the world by market cap

One of the 50 largest companies in the world by market cap

* Includes capital gains from Airwave in 2Q07 of € 1.3 bn, and € 1.37 bn from Endemol in 3Q07.** Average staff as of September 2007.

Among the 100 largest companies in the world by revenues

Among the 100 largest companies in the world by revenues

International integrated Telco company by customer base

International integrated Telco company by customer base

European integrated Telco operator by market capitalisation

European integrated Telco operator by market capitalisation

1st 1st

1st 1st

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Total accesses (as reported by companies)=Fixed lines + Mobile subscribers + Narrow and Broad Band + Pay TV.

Geographic Diversification 9M07

Business Diversification 9M07

… as it enjoys a unique diversified portfolio among the largest operators at a worldwide level

Total accesses worldwide Top 10Million accesses as of September 2007

73.2%

Accesses Revenues

Accesses

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Data as of September 2007

Wireline market rankingMobile market ranking

Telefónica is a leader in the Latin American Telco market …

Note: Central America includes Guatemala, Panama, El Salvador and Nicaragua* As of 2006, using IDATE’s 2006 accesses estimates (DigiWorld 2007)

Total Accesses (as of Sep’07)126.5 Mill.

Market Share* (2006)28%

Argentina: 18.8 Mill.

Brazil: 46.6 Mill.

Central America: 5.0 Mill.

Colombia: 10.1 Mill.

Chile: 9.1 Mill.

Ecuador: 2.6

Mill. México: 11.1 Mill.

Peru: 11.2 Mill.

Uruguay: 1.0 Mill.

Venezuela: 9.8 Mill.

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12

21

11

2

2

11

1

1

2

6

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... and has obtained a relevant scale in the European market …

Total Accesses (as of Sep’07)86.1 Mill.

Market Share* (2006)10%

Data as of September 2007

* As of 2006, using IDATE’s 2006 accesses estimates for EU-25 (DigiWorld 2007)

Wireline market rankingMobile market ranking

Germany: 12.6 Mill.

Spain: 45.6 Mill.

Ireland: 1.6 Mill.

UK: 18.0 Mill.

Czech Republic: 7.8 Mill.

Slovakia: 0.5 Mill.

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11

2

1

3

7

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Moreover, Telefónica’s activity has a clear positive impact in the societies where it is present

... a driver for

technological innovation

and employment

...

As an engine

of economic

development …

... a company committed to help

overcome the digital divides ...

... and a perfect

partner to foster social development

IN SOCIETY

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Telefónica is helping to overcome the digital divides and is committed to social development Skills inclusion

25,000 child workers reintegrated into school in Latin AmericaUsed by more than 25 Million people in Spain and Latin America

Social inclusion

Telefónica Accesible, launched in partnership with people with disabilities

For Spanish employees in retirement

Telefónica invested in Social Action more than €50 Mill. during 2006,

which benefited more than 33 million people

worldwide

Telefónica’s global investment in Social Action

(€ Thousand)

+12.4%

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Telefónica R&D: Telefónica’s

research and development unit

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Telefónica I+D was created in 1988 with the mission of contributing to the improvement of the Telefónica Group competitiveness through technological innovation.

Network and platforms

Services for the final customer

Operation Support Systems

(OSS) Business Support

Systems (BSS)

Multimedia Applications, Multilingual Services and new Internet paradigms

Telefónica I+D's activities focus

45M€ invested in

Applied Research

207M€ of totalactivity

1189 staff94% University

graduates

Collaborating with 36

companies onProject

development

Agreements with

29 universities

89 EU financedprojects

260 IPR’s protected and

registered

203 papers and

conferences

350 Trainees

Telefónica I+D’s figures of the year 2006

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Our centres

MADRID (1,263 people)BARCELONA (187 people) VALLADOLID (Boecillo) (242 people)

HUESCA (Walqa) (26 people) MEXICO (2 people)BRAZIL (182 people)GRANADA (31 people)

1,933 people are working in our centres around the world

Last update on December 31st, 2007

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In 2007 Technological Innovation(1) in Telefónica exceeded € 4,300 millions

(1) According to OECD's definitions.

Products/Services/Processes Development Technologi

calInnovation (1)

R&DM€ 594

Who does it?

What are we developing?

M€ 4,384

How do we innovate?

Who do innovate?

Applied Research

R&DM€ 61

Who promotes it?

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The complete innovation cycle

Where?

TID

Research

Development

Invention

Pre-commercialInnovation

CommercialInnovation

CommercialExploitation

Research Development of innovation Exploitation

Subsidies and Corporate Business Units

BU’sWho?

Financing?

LocalGlobal Regional

Applied researc

h

Evolution Deploym

ent

Basic researc

h

Pilot test

Prototype

Demos

InitialDeploymen

t

Solution

proposal

Telefónica I+D focus

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We are a key element in the Open Innovation process of Telefónica

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Initiatives Telefónica Corporate Innovation Programme

IncubationProgramme

Venture Capital

CorporateInnovation

Group

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Telefónica R&D’s Direction for

Services to the End Customer

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Telefonica I+DAreas of activity

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Internet andMultimedia

Services for the Final Customer

Networks and Platforms

OSS BSS

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Services for the Final CustomerAreas of activity

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Services for theEnterprise

Services for the Final Customer

Personal MobileServices

Connected Car

ConnectedDigital Home

eHealthServices

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What makes us differentBeyond products and services

Analyzing and evaluating user experience interaction beyond mobile services, products and devicesTest, register and analyze in real environments

— Home, Car, Office, eHealth, etc.

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What makes us differenteXtreme User Experience: User centered development

Concept Prototype Test Analysis In depth design, usability and technical feedbackClose to development team: short cycles cost efficient

—Start with prototypes in early development stages (before we don’t have time to turn things around)

—Mockups and real working prototypes—Agile Scrum - Incorporating Usability Practices and UCD

Processes in Agile Projects User Experience Senior Designer

Concept Design Team

Usability TeamTechnical prototypingTeam

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The Connected Car, a key area within Telefónica R&D

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Autonomic Computing

Augmentedreality

Device management

WidgetsGadgetsmashups

Ambient intelligence

Multimedia search

QoSQoE

UserGeneratedServices

Internetof Things

Identity

Personalization

Recommendationsystems

EnablersEnablers

2008-11Strategy2008-11Strategy

Serv

ices

Serv

ices Infrastructures

Infrastructures

LongTerm

LongTerm Mid

Term

MidTerm Short

Term

ShortTerm

eEntertainment

Broadbandaccess

eHealth

Connectedcar

Rating &charging

DigitalHome

NGN

Core network evolution

Telepresence

Open capabilities

Advertising

Security & trust

Financial services

New generation of business environments

Urban computing

Services for the enterprise

Base Of Pyramid

Mobile Internet &personal mobile services

User characterization

Next generation SOA/WEB

Agile networks

Audio/video/imageprocessing

UX - User eXperience

Key areasLong tail areas

Hybridworlds

Ubiquitousvideo

Future service platforms

Ubiquitous & Seamless Access

Social media & communications

Devices

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The Connected CarSmart services for safer, more efficientand more comfortable trips

Why?Why? Every day, millions of people in the world use their vehicles to go to work or in their leisure time and spend time in the car. This means traffic jams, parking problems, navigation, need for communication with the “outside world”, …

What?What? We are working towards guaranteeing always-on communications for users in four- and two-wheeled vehicles, providing them with smart, useful services to solve the above problems, and delivering all this in heterogeneous devices, from in-car systems to mobile phones, and plug’n’play

How?How? Through basic and applied research, development of pre-commercial prototypes, field trials and early customer insight tests. Some R&D projects and fora we are involved in:

Contact details:

Carolina Pinart

Divisional HeadE-mail: cpg@tid.esPhone: +34913374952

Telefónica I+D – Telefónica GroupNetworked Vehicles Divisionc/ Emilio Vargas 6, 28043 Madrid (Spain)Web: www.tid.es/netvehicles

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Behind the Connected Car: the Networked Vehicles Group

Created in 2007 from in-house experience in vehicular networking

100% focused on vehicular services and communications

Advanced services for drivers and passengers on mobile and in-car environments

Vehicle to vehicle (V2V), to infrastructure (V2I) and to road (V2R) communications

Proof of concept, demonstrations and field operational tests (FOT)

Participation in 10+ R&D projects, highlighting:

Ongoing: FP7-TeleFOT, FP6-GOODROUTE,

FP6-SAFESPOT, EUREKA-CaringCars, Spanish

CENIT-MARTA, Spanish PSE-m:Vía (leader)

Due: FP6-MYCAREVENT, FP6-COM2REACT, Telefónica eCar

Participation in a number of related fora and technology platforms:

(Leadership of vehicular group)

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The three pillars of the Connected Car (2007-2010)

What?What? Services targeted for drivers, who use their cell phones

When?When? Short-term

Our approach:Our approach: Movistar CarMovistar Car services on basic and advanced cell phones with 2.5/3G connectivity (*), 2G for eCall

What?What? Roadside network infrastructure for V2R and Real-time Traffic Info

When?When? Mid- to long-term

Our approach:Our approach: Telefónica Telefónica Road NetworkRoad Network, hot spots on the road with WAVE-based for V2R connectivity and fiber optics/radio links backbone connectivity

What?What? Brought-in or in-car framework to enhance the driving experience

When?When? Mid- to long-term

Our approach:Our approach: Telefónica In-Telefónica In-Car BoxCar Box, a software framework for managing Always Best Connected V2x communications (**) and OSGi-based services for safety, routing/assistance, communications and infotainment

(*) WiFi optional, depending on the features of the cell phone. (**) Based on the Hybrid Node concept.(***) Real-time Traffic Information (RTI).

Connecting the DriverConnecting the Driver Making the cell phonecell phone a useful tool also in the carin the car

Connecting the DriverConnecting the Driver Making the cell phonecell phone a useful tool also in the carin the car

Connecting the CarConnecting the CarEnhancing the driving experiencedriving experienceConnecting the CarConnecting the Car

Enhancing the driving experiencedriving experience

Connecting the RoadsConnecting the RoadsPlacing hot spots along the roadshot spots along the roadsto provide RTI RTI (***) and enhanced

InternetInternet access to drivers & passengers

Connecting the RoadsConnecting the RoadsPlacing hot spots along the roadshot spots along the roadsto provide RTI RTI (***) and enhanced

InternetInternet access to drivers & passengers

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Our R&D approach

11Know the key agents in the ITS field, and also our competitors, whoever and wherever they are

33Focus on product ideas aligned with the strategy

Movistar Car, Telefónica Road Network, Telefónica In-Car Box

Work with and learn from the big ones- Partnerships to turn product ideas into products- Basic and applied research “providers” to solve challenges of current product ideas and to spot future product ideas

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22Have a clear strategy for short- and mid-to-long-term, and hints on longer-term

Towards

Ambient

Intelligence

& Advanced

Networking

Hybrid Node

OSGi Service Framework

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The Telefónica In-Car Box

Piece of software running on an in-car or brought-in device or set of devices that contains communications and services for drivers and passengers

Key features— Always-on, QoS-enabled communications

— Our solution: in-vehicle communications manager. Based on three axes

– Always Best Connected, where “Best” deals with QoS and “Connected” encompasses wireless and mobile technologies

– Compliance with the CALM standard under development at the ISO– (Part of) the network is enabled with IMS

— Open, powerful, felxible service framework— Our solution: OSGi-based common service layer

— Further information in the talk “Use of OSGi in Telefónica's Connected Car initiative” by M. García.

— Advanced services around an enhanced navigation experience covering— Safety and assistance— Routing and traffic-related information— Entertainment

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Interested in joining us?

Yes… Maybe… But what do you offer?

Besides an excellent team, a challenging R&D field covering many aspects, from application platforms to communications, interfacing to user experience, service design to development and trials, and international exposure…

… we offer three kinds of contractual relationships, from loose to tight:

- Internships (Becas Telefónica I+D) for undergraduate students in Telecom, Computer Science and related fields. For further information: https://www.tid.es/trabaja_investigacion_desarrollo/jsp/estudiantes.jsp - PhD Fellowships for young graduates willing to pursue the PhD. We have an ever growing joint Program universities in Madrid and Barcelona, and hopefully soon the UVA (contact person: Ana González, anag@tid.es)- Permanent positions (Engineering staff) for young graduates.

Want to know more?

Contact us: Carolina (cpg@tid.es) and/or Daniel (dgf@tid.es)

29© 2008 Telefónica Investigación y Desarrollo, S.A. Unipersonal