In-flight connectivity wants to be free

31 May 2016

In-flight connectivity (IFC) is in high demand from consumers, but depending on where you are in the value chain, it won’t be easy to monetize that demand, especially when many passengers expect it to be free.

“Right now the satellite operators are the ones making the profit on in-flight connectivity,” says Todd Hill, senior director of GCS Satellite Services at Panasonic.

Part of the problem has to do with the cost of aircraft antennas, which are hard to install, “although the technology is improving.” Hill says.

The other issue is the cost of the actually connectivity itself. While HTS satellites and Ka-band are touted for their ability to bring the cost per megabit down, the problem is that Ka-band isn’t an all-purpose solution that will be available everywhere.

“We’re building a global network, so one size is not going to fit all,” Hill says. “Ka-band doesn’t fit every need. HTS can bring the cost down, but you also get these spikes in supply whenever a new gigabit satellite goes up that affects pricing.”

Erwin Hudson, VP/GM at ViaSat, says that everyone in the IFC value chain - satellite players, the service providers and the airlines - can make money, but that for the airlines, it’s as much about value creation as literally earning money from in-flight broadband. “For example, enhancing customer satisfaction - there’s great value there for the airlines.”

Which is as well, because if airlines have learned anything about IFC, it’s that customers generally aren’t willing to pay for it, especially as they become accustomed to Wi-Fi as a complimentary service in hotels, airports and coffee shops.

“Customers do expect this for free, which is to say they expect it to be included in the ticket price, and that’s the way we’d rather see it go,” Hudson says. “There are different business models out there, such as pay-as-you-go, freemium or free, and we’ll see all three in play. But when you charge money for it, your take-up rate is around 10% to 15%, whereas when it’s free the take-up rate is as high as 100% or even 105%, because we count devices, not people, and many people have more than one device. So we think free is where it’s ultimately going to go.”

Hudson adds that IFC is a segmented market - commercial airlines, private jets, military/government, etc - with different requirements and business models for each, “so there’s a substantial opportunity there.”

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