There was already a short-term impact, with declines in those companies' share prices Thursday. Longer term, the value of the multi-function smartphone is enhanced, especially for Nokia, which makes more mobile phones than any manufacturer, but has performed poorly in the U.S.
"Nokia's done incredibly bad in the U.S., but I wonder if this free navigation might give them the edge to increase smartphone market share there," said analyst Dominique Bonte of ABI Research in a telephone interview.
Apple Inc. is also going to be required to offer navigation for free on the iPhone, given the pressure from Nokia and from Google 's Android phones, Bonte said. But Apple will face a dilemma with developers because it already offers many third-party GPS applications, for a cost, in its AppStore. "Apple can't stay behind and will have to have turn-by-turn themselves," and might even acquire a company to do so, Bonte added.
The immediate impact of the Nokia news caused an 11% drop in share prices of TomTom in trading in Amsterdam, and a 5.5% drop in share prices of Garmin on the Nasdaq exchange.
Those declines were not as great as when Google Inc. upgraded software to provide free navigation last fall that appeared first on the Motorola Droid, an Android phone sold in the U.S. by Verizon Wireless.
When Google's announcement hit on Oct. 28, TomTom share prices fell 20%, while Garmin's dropped by 16%.
TomTom issued a statement after Nokia's announcement yesterday, calling attention to TomTom's "very high levels of customer adoption" of its core products for car navigation and digital maps. "In fact, customers have consistently demonstrated a willingness to pay for the best user experience. While competition continues to be fierce in the development of LBS (Location Based Services) and sponsored maps, TomTom remains focused on innovation...."
A Garmin spokeswoman said Garmin is "already innovating and has similar free offers" including on its Nuvifone, which was launched on AT&T's network last October. Garmin hasn't released sales figures for the Nuvifone, but the spokesman characterized it as "doing OK, with some other launches coming."
TomTom, Garmin and others will innovate out of their competitive battles industry giants Nokia and Google by doing some predictable things, including the launch of dedicated GPS devices with larger screen sizes of 7 inches, making it easier to read satellite images than on a 3.5-inch smartphone screen, Bonte said.
The companies making Personal Navigation Devices (PNDs) like Garmin and TomTom "won't disappear because of Nokia and Google, but will have to be incredibly inventive to keep designing very exceptional devices," Bonte added. "PNDs will survice, although I can't see much growth in that segment."
A bigger, longer-term focus for all the players will be on Location Based Services (LBS), which are inherently connected to advertising.
Google is probably best positioned to take advantage of GPS and ads, although Nokia is fighting to dominate that market, analysts said. For example, a user who searches for a store or restaurant gets several options near his or her location. Part or all of that information is likely to be delivered via some sort of quick ad in text, or even a retailer's logo, which the retailer paid Google to present to the user.
Garmin is "already doing advertising to some extent" on automobile GPS devices integrated with real-time free traffic information, the Garmin spokeswoman said.
Jack Gold, an analyst at J. Gold Associates, noted that Google is able to gather location data on its Google Maps GPS users, telling an advertiser that many thousands of users pass his store daily. On those ads for stores passed by more users, the ad rate will likely go up, he said. "That's valuable information," Gold said.
Bonte predicted that premium services for GPS, where a person pays $5 a month for GPS on an existing smartphone, will go away. Sprint Nextel Corp. is already offering free navigation on its Simply Everything plan. "Free plans from Google and Nokia have effectively killed premium navigation services," Bonte said.
The emergence of free navigation on smartphones also means a major consolidation among smaller GPS providers is coming, Bonte predicted. Some companies will go out of business entirely. In December, for instance, TeleCommunications Systems in Annapolis, Md. bought Networks in Motion Inc. , a provider of wireless navigation for GPS-enabled phones, for $110 million in cash and stock.
The future of Appello Systems, Telenav, and other smaller GPS players, is in question, Bonte said. "Maybe the bigger ones will survive, but I can't see how all will survive," he added. "They may disappear or merge or be acquired by Apple maybe."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld . Follow Matt on Twitter at @matthamblen , send e-mail to firstname.lastname@example.org or subscribe to Matt's RSS feed .
This story, "Nokia's News of Free GPS Already Hits Rivals" was originally published by Computerworld.