Broadband on wheels: Connectivity is the new MPG

March 12, 2014: 12:12 PM ET

Audi's new A3 sedan is first with 4G LTE high-speed connectivity.

By Doron Levin

2015 Audi A3 sedan

2015 Audi A3 sedan

FORTUNE -- The 2015 A3 sedan soon arriving at U.S. dealerships will offer a key option not available in the other models in Audi's lineup -- or, in fact, any vehicle now on sale: 4G LTE.

As the first vehicle with 4G LTE connectivity, the A3 portends an automotive era in which drivers and passengers will stream video, audio and use a wide variety of apps that weren't possible with 3G. Other Audi models may offer the higher-speed Internet in a year or so, the company says. General Motors Co. (GM) has announced that it will begin to offer broadband in its models later this year; others are expected to follow.

The feature is being offered first on Audi's lowest-priced model, which starts in price at about $30,000, because younger and entry-level shoppers are expected to have more interest in advanced connectivity than shoppers for larger, more expensive Audi models, such as the A8 sedan.

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Good-bye, FM radio. Hello, House of Cards. The A3's navigation system will enable operation of Google Earth and Google Street View, allowing drivers to view destinations, buildings, and landmarks on the car's display as photographs rather than as representations on maps.

When searching points of interest in navigation mode, drivers with 4G connectivity will be able to use Google's (GOOG) search function in the same manner as on a laptop or tablet.

Car-based Internet represents the next logical step for a digital technology that has become increasingly ubiquitous in homes and hotels, on airline flights, and at retail establishments like Starbucks (SBUX). At the same time, broadband in cars could also pose an additional distraction to drivers who already are using smartphones to navigate, text, and conduct phone conversations. Carmakers are bracing for criticism and, possibly, regulatory pushback.

Filip Brabec, Audi program manager, said "4G LTE in the car is an opportunity for the people who are coming along for the ride to have a seamless data connection and the ability to enjoy much more content on their devices. All the services in the car also naturally get a lot faster."

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The service will provide a new revenue source for Audi, as well as for its partner, AT&T (T), which have agreed to split revenue generated from car-based broadband. After a six-month trial period, AT&T will charge A3 owners $99 for 6 gigabytes of data over a six-month period or $499 for 30 gigabytes of data over a 30-month period. Audi says the cost averages to about $16 a month.

Brabec noted that "digital technology and innovation is moving much faster than automotive." Thus, the usual four to five years between new vehicle introductions is too long to wait to introduce infotainment features that carbuyers want now. Audi said the new A3 sedan is the first with a self-contained module that holds the hardware and software needed for broadband and other infotainment systems. Previous systems were designed within an electronic network throughout the car and, therefore, were impractical to replace until the entire vehicle was redesigned.

With the new module, Brabec said, Audi will gain the capability of introducing entirely new digital features -- if it wishes -- in a 2016 A3, without other major changes to the car.

The automotive industry appears on the brink of being driven as much by bandwidth as by horsepower.

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