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InSight — NSR
In-Flight Satellite Connectivity... Are We There Yet?

When discussing the Ku-band commercial airline broadband access market, the image that comes to mind is that of a famous animation movie where a donkey travels to a faraway land constantly asking the ogre driving the carriage: “Are we there yet?” Today, the answer would be, “Just about there,” to which the donkey’s reply would be, “Ahhh! Finally.”

This is also the feeling of the market, after almost three years of travelling since the first Ku-band broadband Internet service in the sky, Connexion-by-Boeing (CbB), was shut down.

Germany’s Lufthansa airline announced in mid-October that it is revving up the engines and readying for take-off with its broadband service with the help of in-flight entertainment specialist Panasonic Aviation Corporation (ex-Matsushita) with, guess what? The old CbB antennas still on the roof of many of its passenger aircraft! Lufthansa will eventually outfit the airplanes with the EMS TechnologiesAura systems (which are a variant of Starling’s Ku-band Mi-Jet system) to the tune of US$60 million on about 120 airframes. But for the time being, and to minimize initial capital investment, they are launching the service on 70 airplanes that have the old hardware still glued to the back of its wide-bodies.

What does all this mean for the whole commercial passenger airline market?

For starters, it means happy ex-CbB customers will long for a (long) flight on Lufthansa. Truly appreciated when it was available, CbB was dismissed for its cost, not its quality. Second, it is an opportunity for the company to differentiate itself in the highly competitive regular airline market by signing-up new clients to the megabits per second (Mbps) connectivity service while at cruising altitude. But more importantly for the whole sector, it means that other airlines will surely follow (Twitter?) the new service while it’s flying medium-haul and especially long oceanic routes to learn if its worthwhile picking up one of these new systems for a couple of hundred thousand dollars each.

The re-launch will also help get key questions answered for the service such as: Is there a real need for passengers to log-on to the Internet while on a red-eye from North America to Europe or Asia? At what time and over which regions will users try to connect? Is a flat fee for the flight or a per hour metered service better? Will users get annoyed by the latency inherent to the satellite? These and many other parameters still need to be completely understood from an operational point-of-view and will refine future customers’ models.

In this market, we may first see a play developing mostly over ocean regions and for long hauls, which can assure continuity of service once over open waters. But the three to four hour flights on continental routes could also be very lucrative for satellite as equipment prices have dropped considerably, and weight is less than ever before; consider Starling’s Mi-Jet is 110 lb., while CbB was reported to weight 600 lb. and can be fitted on top of planes in hours rather than days or weeks. What remains to be seen is the price of service that airlines will charge compared to the ill-fated $30 per flight passengers paid for CbB.

There is already a certain level of confidence in the patterns that users will follow, but the actual day-to-day operations of the system will reveal the newest trends in passenger communications habits, be it in business or economy class.

And new habits there will be. As much as today’s kids travel by car while looking at a screen and not the scenery, some air passengers have stopped looking out the window at vast expanses of land or sea to look at a screen. Part of this reasoning is due to the fact since the CbB days, things have changed, and the use of broadband access is no longer the privy of laptop owners.

Many people forget that user habits have changed thanks to the tremendous success of new form factors in mobile connectivity with the advent of notebooks, personal digital assistants (PDAs), Smartphones (and other iPhone-like devices). And the killer applications sustaining all these devices, namely email and short message system (SMS) as well as a multitude of short-sentences narrowband communications tools, have exploded in the land of multimedia applications. To add more fuel to the capacity constraint debate, video is all the rage in mobility applications, and it is easier than ever to shoot videos and upload them. How much longer will there be a resistance to deny passengers what they are getting on the ground?

During its recent webinar on “The Coming MSS Capacity Surge: Where is the Demand”, NSR indicated that one of the key opportunities to fill up new satellites is in airborne services. Indeed, MSS operators have reported double-digit growth in airborne services over the past twelve months, and key airlines such as British Airways are launching L-band services on transatlantic routes.

Furthermore, the top MSS operators will be capable of delivering broadband speeds to airframes in the kilobits (if not megabits) per second in the coming decade, and we expect the migration to these services to occur (and be pushed by operators). Installing broadband systems before they leave the factory may also make sense.

NSR homepage The flight blog RWG recently said that the rumor mill is running high with talk that Boeing is asking for quotes from equipment providers for in-flight connectivity for its newest addition, the Boeing-787. With the downturn experienced in the other commercial market, business jets, this would be a boon to any of the manufacturers that are touting their wares in this highly-competitive market.

The Bottom Line
All in all, the buzz around Ku-band for commercial passenger aircraft has never been so high since the demise of Connexion-by-Boeing, but competition from other systems is also at an all–time high. Broadband services, although still a very emergent market, promise to beat narrowband revenues in the mid- to long-term due to passenger thirst for laptop connectivity at DSL and above speeds. If the timing of the Lufthansa deal is an indication, airlines have a stronger desire than ever to offer more services to their clients while in-flight, and it could signal the arrival of Ku-band at its destination.