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Sirius XM (NASDAQ:SIRI) and AT&T (NYSE:T) announced that the two firms have partnered up to bring Sirius XM's telematics into the dashboard of Nissan (OTCPK:NSANY) vehicles. In the deal, AT&T will provide the mobile connectivity that enables next generation Sirius XM services to come to life.

There was a time not so many years ago when cell phones were called car phones. Believe it or not the car phone is coming back, but not in the manner you might think.

Satellite radio is a wonderful service, but it is a one way communication. The satellites beam down content. The antenna on a car receives that content. Chip-sets decode that content, and your stereo plays it in the form of music, news, sports, stock quotes, channel logs, artist names, etc. There is no way for the consumer to interact with the satellite. The only way that Sirius XM can receive input from a user is over its Internet radio side of the business.

Sirius XM has a deal in place with Nissan to make its service much more robust. Sirius XM telematics will include things like navigation, gas prices, weather, traffic and more. The telematics suite could even include things like dinner reservations, movie tickets, parking spot locators and more.

All of these services require a data connection, and that is where AT&T comes into the picture. AT&T can supply that connection and seamlessly integrate it with the Sirius XM suite. This takes satellite radio to an all new level.

Pricing for the Sirius XM suite and pricing for the data connection have not been announced. The wording of the press release would hint that the consumer will pay one bill to Sirius XM and that Sirius XM will pay AT&T (most likely a set fee). In one manner of speaking Sirius XM appears to be entering the cellular distribution arena.

As exciting as this news is, we need to consider that the connected car has many variables and many paths that can be taken. Subsequent to inking this deal with Nissan, Sirius XM has re-done a deal with BMW, GM (NYSE:GM), Toyota (NYSE:TM) and Ford (NYSE:F) without any of these players making announcements relating to Sirius XM's telematics package. It does not mean that the possibility of deals is gone, but it would appear that, at a minimum, these other automakers were not ready to bring that new level to the relationship.

There will be a lot of eyes on Nissan as these new cars roll out. Will consumers embrace this concept? What will the cost be? How many cars will carry the option? This is a big test for Sirius XM. The player in this game with the least risk and exposure is AT&T.

For Sirius XM investors news like this is not a driver for the equity, but rather something that should be placed in the "potential" pile. It has potential to work, and if it does it can be compelling. On the flip side it has potential to not go anywhere either. An example of potential realized is Sirius XM Internet Radio and the MySXM service that allows consumers to customize their experience. This service keeps Sirius XM relevant and will drive some revenue to the bottom line. An example of potential that did not go anywhere would be Sirius XM's Backseat TV, a service that offered a few cartoon channels to back seat monitors in Chrysler vehicles. That service is now in the scrap yard.

More importantly investors will want to focus their attention to the upcoming Q2 conference call, which is just over a week away. Stay tuned.

Source: Sirius XM Inks Telematics Deal With AT&T

Additional disclosure: I have no position in AT&T