As many fret about the 2008 economy, there is growing concern that slowing consumer spending will halt plans for the deployment of wireless networks on commercial aircraft. However, past data has shown that microeconomic factors like pricing and the ability to share equipment costs with other applications have been far more a factor for this industry than the state of the overall economy.
The in-flight connectivity industry struggled to get going in 2005 and 2006 while airline profits were increasing, and plane orders were hitting record levels. One of the biggest issues has been uncertainty over what to charge passengers. Some carriers are still determining whether they should pursue hotel-like business models, such as Virgin America's, that anticipate ancillary revenue from each passenger, or whether they should just offer broadband as an amenity. So while an economic slowdown could create isolated deployment delays, a bigger problem is having no firm idea what to charge passengers, which is what happened with CBB, Tenzing, and Jetconnect.
March 10, 2008 - In the Ground, In the Sky
One of the interesting aspects of covering data communications on airplanes is noticing the extent to which their use mirrors their counterparts on the ground. The communications protocol in the AFDX avionics bus, for example, reflects the broad acceptance of Ethernet in terrestrial networks, albeit with some modifications to handle frame collisions.
With last year's ARINC
818 standard however, the Airline Electrical Engineering Committee
decided to follow the military's lead, and deploy FC-AV (Fibre
Channel – Audio Video), a technology that has struggled on the
ground, especially since the multi-mode fiber and twisted-pair
variants of 10 Gigabit Ethernet started shipping in high volumes three
years ago.
FC-AV is already used
extensively on military jets, which obviously don't have much need
for IFE, but need video to depict navaids, for Head-Up Displays, and
on other devices where there's an immediate, tactical application.
As a result, the military often moves quickly to deploy the latest
technology, even if it means paying a little more. The problem with
copying the armed services is that the Air Force does not have to
answer to shareholders. Ethernet chipsets, even if modified for
deterministic operation as is done with ARINC 664, are 25-40% cheaper
than their Fibre Channel counterparts, and that gap is growing as
terrestrial Storage Area Networks slowly move away from Fibre Channel
to 10 GigE.
The avionics industry is
marching forward with a near certain attitude about the use of Fibre
Channel for packet video. But after the 777 entered into service in
1995, there was a similar consensus about using FDDI (Fiber Data
Distributed Interface) for high-speed data and video on aircraft.
Then that protocol got trounced in the LAN/MAN market by Fast
Ethernet and ultimately, Gigabit Ethernet. Once the technology
couldn't survive on the ground, it had no chance in the sky. And
unless it can halt its market share losses to Ethernet in the
terrestrial SAN market, Fibre Channel could be the next ground
protocol to get pushed out of the avionics market.
February 8, 2008 - Survey Nonsense & A Big Week Ahead for PRNewswire
With the in-flight comms industry coming back out of its CBB funk, survey data is being tossed around again, just as it was when Boeing was selling its ill-fated service. But anyone who thinks this industry is coming back because of passenger demand should remain skeptical. Plenty of questionnaires in the past have shown strong interest, including this 2004 gem from Boeing, which claimed that 38% of passengers would pay $25 for Internet service, not to mention others which showed that 80 or 90% were "interested". So with such a weak track record, why should today's surveys be taken more seriously?
They shouldn't of course, because the potential market for this business brings the same strong demographics and supposedly strong demand that it did five years ago. And neither factor made Connexion a success, and neither factor alone will make Aircell, Row 44 AeroMobile, eXconnect, LiveTV, or OnAir a success now. The most important difference today is that excluding the external antenna, the components to install these services cost about 80% less than they did five years ago, and weigh about 60% less. And even now, the airlines are still guessing what to charge.
While costs continue to come down, there is still plenty of lost revenue from retrofitting an A330 and taking it out of service an additional 2-3 days. Therefore, even though there can still be good reason to install a system on a jet, any fleet-wide implementation by a flag carrier will take 18 months at least. Additionally, there is not going to be price uniformity, just as there isn't for IFE or food service. Continental's plan to charge economy passengers $6 for the LiveTV IFE package, while offering it free in first class can't be replicated by Southwest or Ryanair, who would obviously have to price their connectivity services differently. Either way, asking someone what they might
pay for Row 44 is about as useful as asking them if they will pay an entrance fee
to watch the first Virgin Galactic launch. They're guessing either way.
Few innovations ever occur based on survey results anyway, and the airline business is mature enough that it typically makes more sense to look at operational data. So just as free IFE has encouraged repeat business on JetBlue, one of the most sensible ways for airlines to price connectivity (outside of free like CO is doing) is in a pre-pay or multi-flight package to encourage fliers to stick with that carrier. But even if airlines opt for the current US or NW strategy of no IFE on most domestic flights, passenger surveys with lots of hypothetical questions have already served this industry well as an entertaining chapter in the Connexion story. There's no need for a sequel.
In other news, the Mobile World Congress convention hasn't event started yet, and the press wire is already lighting up with announcements about picocells and femtocells as vendors try to attract attention before the media frenzy picks up next week. These announcements, including Netgear's OEM of Ubiqusisys' femto platform, are important for the in-flight comms industry, because products based on these technologies are very likely to make their way into airline cabins within the next few years.
February 1, 2008 - Airborne Picocell Networks
Chief Analyst David Gross speaks with Addison Schonland at IAG. Click here to listen to the podcast.
January 25, 2008 - The Orbitz-Southwest Battle Comes to In-Flight Internet
Since this industry began asking passengers what they wanted six years ago, it has developed a reliable record of producing exactly the opposite result anticipated by the market research. Towards the end of 2005, Boeing asked 3,200 business fliers about the importance of In-Flight Internet, and 83% responded that it would affect their choice of air carrier, while 94% said they planned to use Connexion in the future. Towards the end of 2006, Boeing had no service to offer them.
Much of the weakness of survey results has been overcome in the last few years with the advent of new data mining tools which allow companies to dig deep into transaction and customer databases to determine usage behavior. This has turned out to be far more valuable to many internal market intelligence groups than having people color in ovals with pencils.
As external analysts, we have to look for new data sources where we can model usage. One example is text messaging, where the in-flight service offers a similar price and quality to services already offered on cruise ships and for international travelers. This gives us reasonable estimates for how many messages will be sent per hour, the demographics of the users, time of day preferences, etc. If users tried tell us this information in a phone interview or focus group, we'd chuck it out, because their actual usage tells us a lot more than asking them about a potential experience they might not have for three to five years.
So getting back to the good news for aviation broadband, we were starting to get concerned about all the news announcements lately. With all the text messaging plans, Wi-Fi deployments, and coverage in mainsteam news outlets, we were starting to think that we might see yet another ridiculous survey claiming 90% of business users will want Internet access next week when they fly a Comair CRJ to Cincinnati.
A Whole Lotta Luv, But Hated at Orbitz
Concerned about renewed hype for this sector, we were very relieved by the Orbitz survey which showed 56% of business pax claiming that they don't want to be connected while flying, with some telling the Orbitz survey takers that they just want down time while in the air. We, of course, would want to know how come so many business passengers now spend mid-day transcons on their laptops, reading and underlining work papers, and generally trying to look like they have something important to do. Maybe these passengers were too busy to take the Orbitz survey.
The Orbitz data also doesn't jive with the high numbers of passengers using BetaBlue. But then again, it's owned by five airlines who compete against JetBlue, and outside of AA, none of them has any plans for broadband, and have a lot to lose if it does in fact become a major factor in travel decisions, as Boeing inaccurately predicted from its 2005 survey.
The Orbitz owners also have a big problem with Southwest, because it won't feed their reservation system, it forces them to cut fares, and it sued them in 2001 to prevent the creation of the online booking system. So it's not surprising that they decided to cool the press wire activity around the Southwest-Row 44 story. But either way, this is not objective data, and even if it were, the track record of aviation broadband surveys suggests that the exact opposite of what they predict will probably happen.
January 18, 2008 - 2007 was a Big Year for Airline Wi-Fi
2007 might be remembered as the year that Wi-Fi really
started to have a big impact on commercial aviation. But most passengers are more likely to have
been been on a plane with a Wi-Fi network than to have used one while flying,
because airlines are primarily using 802.11 now for crew communications and
flight operations.
While pundits and the press debate the safety and intrusiveness of Wi-Fi signals on planes, airlines are installing them now by the
dozens, primarily for EFB (Electronic Flight Bag) updates and for FOQA (Flight
Operations Quality Assurance, careful how you pronounce the acronym).
January 11, 2008 - CES Update : Dreamflyer
Out at CES, amidst the wireless gadgets, solar-powered laptops, and 20 foot tall robots, we found something any flight geek would love - the Dreamflyer. Working with a standard PC and monitor, this device lets you fly MS Flight Sim in a seat that twists and turns as you bank, drop the nose, and throttle the plane.
Since 2000, wireless providers have been planning and preparing for new data services. But eight years later, data revenue per user in many countries has not been able to creep above $5 per month, or about 10% of total. For all the investments in WAP, GPRS, EV-DO, and WiMax, cell phone providers remain heavily dependent on voice. Today, SMS is being used more frequently by business users, particularly in the technology sector, which not surprisingly has historically led other industries in adopting new data services. And its revenue continues to grow in the high double digits, even with the advent of the iPhone and more sophisicated PDAs. Therefore, just by offering low bandwidth text services, airlines can match a significant component of the mobile technology used by their passengers when they are not flying. With SwiftBroadband limited to 432 kbps, many airlines planning broadband services that go beyond text messaging and e-mail have their sites set on air-to-ground or Ku-band systems. In most situations, air-to-ground offers the best price per bit, but with obvious coverage gaps. Ku-band can fill many of those gaps, but its increasing popularity in the skies has brought out many of the same arguments used against it on the ground, particularly the concern that it can handle connections December 7, 2007 - JetBlue Wi-Fi Coming Tuesday
Many wireless data standards, such as EV-DO and WiMax, are trying to save themselves as broadband services for laptop users. But SMS is the one cell phone-based data service that has not disappointed. Its low bandwidth requirements led many engineers question its usefulness as it developed in the early 2000s. As was the case with IM, social networking, and other connectivity tools, many middle age technologists at telcos had little insight into how younger, up-and-coming demographics would use the networks they design.
Aviation only adds to the potential problems of signal degradation, because of all the clouds that come along with rain, ice, and other atmospheric debris that can interfere with a 12GHz transmission from outer space. And with one proposed Ku-Band system already in the history books, what will this mean for current and future services?
Thing is, a number of the private jets running ARINC SKYLink, like the Dassault Falcon 7X, and Gulfstream G550, are certified up to FL510.And outside of some obnoxious summer thunderstorms, there’s not much rain falling above
Among commercial jets at lower altitudes, there is a little more potential for interference. However, many 737-800 carriers, including Row 44 customer Alaska Airlines, are going for the blended winglets option, which means they’ll often cruise between FL370 and FL410, in order to get the best gas mileage for their fuel efficient wings. But even at more common cruise altitudes in the low 30s, clouds and rain are fairly uncommon, particularly in winter.
While it is still reasonable to argue about the costs, antenna sizes, and coverage limitations of Ku-Band services to aircraft, the discussions about rain fade should probably just remain on the ground.
When airlines announce in flight connectivity trials and plans, they are usually at least three months away from installing systems, often a lot longer. Alaska Airlines, for example, announced its 2008 trial in September. Royal Jordanian's OnAir implementation, announced last month, won't even roll out on its widebodies until 2009. Similar lags have happened with Qantas, Ryanair, American Airlines, Virgin America, and other majors.
So what makes yesterday's JetBlue announcement unique is that its trial starts Tuesday. Since the CBB launch in 2001, much of the disappointment this market has faced has developed in that long time lag between announcing plans to the press, and attempting to offer service to customers. But JetBlue, participating through its LiveTV subsidiary, was persistent during last year's FCC auction of Air-to-Ground spectrum, going 120 rounds, and ultimately bidding $7.02 million to win its 1 MHz slice over Space Data Spectrum Holdings, who helped push the price above the $4-$5 million price tag anticipated for those airwaves.
While some might consider JetBlue's plans to offer just messaging and e-mail somewhat limiting, providing access to the more entertaining aspects of the web would cater to the leisure passengers many of its competitors are willing to forgo. As we wrote a few weeks ago, In Flight Productivity is far more likely to prod competitors into action than more In Flight Entertainment options, considering that outside of Delta's 757s, few majors have responded to JetBlue's TV service since it launched nearly eight years ago, and high yield business passengers would rather work during a domestic flight than watch the Cartoon Network. This is also why it makes sense for JetBlue to initiate its service on a JFK-SFO flight, where it has less than 20% share, and is fighting United P.S., Virgin America, American, and Delta - and not on the more leisurely JFK-FLL run, which the carrier already dominates.
While American has not announced which city pair will be the first to receive its Aircell service, we would be surprised if it was not JFK-LAX or JFK-SFO, particularly with the need to respond to JetBlue and Virgin America's future service. Either way, the competitive pressure the airline broadband industry has always lacked is beginning to emerge.