WHERE ARE THE MILE-HIGH HOOKUPS?
By Joe Brancatelli
November 11, 2009 -- I scream, you scream, we all scream for in-flight Internet. And a few domestic airlines are rushing to provide the sky-high WiFi service we demand. There's just one problem: We don't want to pay for it. Not even a little bit.
Almost 18 months after they first began wiring planes for WiFi, carriers have outfitted around 600 domestic aircraft with one of the two existing flavors of airborne Internet. But they're right back where Boeing and a passel of international airlines were in 2003: They've built it, but no one is coming. Or, to be more precise, very few passengers are putting their money where their Internet appetite is.
Passengers "want to be connected, [but] they want it to be free," Doug Murri, Southwest Airlines senior manager of technologies, told a group of airline and entertainment executives this past summer. Alaska Airlines, testing the same satellite-based WiFi system as Southwest, reports that passenger usage plummets when it charges a fee. The higher the fee, the faster the decline. "Even when we charge $1—and we did try $1—we see a drop-off in people willing to pay," Alaska Airlines executive Craig Chase recently told the Wall Street Journal.
If this gloomy scenario surprises you, it's probably because you've believed the relentless hype emanating from Aircell, which sells a ground-to-air WiFi service it calls GoGo Inflight. Aircell trumpets every airline it signs up, and a tech-obsessed and a less-than-skeptical mainstream media echoes the "news."
The reality is very much different, however. The "uptake" rate, industry jargon for the number of passengers using GoGo during a flight, is abysmal. Although hard numbers are nearly impossible to come by—neither the airlines nor Aircell will discuss them publicly—insiders admit that fewer than 10 percent of all of the people who step on a WiFi-equipped plane are logging on to the Internet.
And most passengers who do log on are doing so free of charge, thanks to an endless series of no-cost trials, sponsored promotions, at-the-gate coupons, and other gimmicks. At the moment, two airlines with a substantial number of GoGo-equipped planes (American and Delta) offer GoGo gratis to first-time users. AirTran Airways is offering a free in-flight WiFi session for each one you purchase. And Virgin America is gifting in-flight WiFi to all passengers during the holiday season, thanks to a promotion sponsored by Google.
For those few willing to pay, Aircell, which sets GoGo's prices, has cut tariffs furiously and repeatedly since the service went live last year. The first price sheet asked passengers to pay $12.95 a session on American Airlines, which only offered GoGo on flights longer than three hours. As the service began appearing on shorter flights, there was a lower price point ($9.95). Then came a $7.95-a-flight option for passengers using GoGo with BlackBerries, iPhones, or other WiFi-enabled mobile devices. A $5.95 price was introduced for the shortest (less than 90 minutes) flights. Then came a daily pass ($12.95) and a monthly pass (30 days of unlimited usage for $49.95, now reduced to just $24.95).
The skimpy intake from passengers wouldn't have been quite so hard for Aircell to swallow if it had a reliable revenue stream from the airlines. But Aircell has had to swallow some or all of the estimated $100,000-a-plane installation cost to induce cash-strapped carriers to hop on the WiFi bandwagon. That's lead to a mad dash for cash (Aircell claims it has raised $265 million), at least one round of staff layoffs, a change of chief executives, and even a request for $65 million in federal stimulus funds.
Things are even less rosy at Aircell's major competitor, Row 44. It scored a publicity coup during the summer when the nation's largest discount carrier, Southwest Airlines, announced it would offer Row 44's WiFi beginning next year. But as analyst Tim Farrar points out, the rollout is contingent on Row 44 raising money to fund the installations. And since its satellite-to-aircraft system costs upwards of $250,000 a plane, Row 44 will have to raise about $125 million to wire Southwest's fleet of 550 Boeing 737s.
"There won't be enough paying users of in-flight broadband for both network providers and airlines to make a profit on the cost of deploying equipment and running a network," he says. "Not in a million years."
Then there are the practical issues weighing on the long-term viability of in-flight Internet. Even if laptop-toting business travelers want to use it, the cramped quarters in coach make WiFi a dicey logistical proposition. After all, anyone who has ever wrestled a laptop onto a seat-back tray table knows the physical constraints. Mobile devices are easier to maneuver, of course, but they also have more limited functionality. Short flights aren't conducive to the Web, either, since federal regulations prohibit the use of electronic devices below 10,000 feet—and that leaves precious little time for working, surfing, or even updating your Twitter or Facebook sites.
Ironically, business travelers who've tried GoGo like it just fine. "I changed a meeting around from 30,000 feet," frequent flier Jon Kiger told me a few weeks ago. "It is quite convenient."
Boeing, which launched its Connexion in-flight service in the summer of 2004 and folded it two years later, blew through at least $1 billion looking for enough business travelers who'd pay for convenience. So far, at least, it doesn't look like Aircell or Row 44 have learned that the gap between what business travelers want and what they'll pay for is a costly chasm indeed.
Of course, in-flight WiFi could possibly prosper without users (or airlines) directly paying the freight. Other third parties could imitate the Google deal with Virgin America. Last week, in fact, Lexus sponsored free WiFi on American Airlines to promote its 2010 cars. Row 44 is partnering with JiWire to develop an advertising-driven portal for free in-flight WiFi. And Boingo is anxious to bring in-flight Internet into its program, which offers travelers access to hundreds of thousands of hotspots nationwide for a flat, monthly fee.
Still, in-flight WiFi providers should be aware that giving travelers what they say they want is risky business. After all, Aircell is only able to offer its ground-to-air Internet service because the company won a Federal Communications Commission auction for most of the radio spectrum once used by in-flight telephones. In the early 1980s, in-flight phones were the high-tech "killer app" that business travelers felt they couldn't live without. But several telecommunications giants and many U.S. carriers wasted two decades and untold millions developing and deploying the Airfone. Seen one on a domestic flight lately?
The Fine Print…
Another drawback for in-flight WiFi: Knowing when you're on an Internet-equipped flight. Only AirTran, with 136 aircraft, and tiny Virgin America, with 28 planes, offer GoGo fleetwide. "Having this available on every flight without an asterisk is a bit of a competitive advantage," says AirTran senior vice president Kevin Healy. Delta, the nation's largest carrier, offers GoGo on about half of its more than 500 full-size domestic jets. American has about 150 planes wired with GoGo. United Airlines has committed to GoGo for just a few transcontinental aircraft. Continental Airlines so far has rejected pitches from both Aircell and Row 44. US Airways says it won't install WiFi until next year. And JetBlue Airways has made virtually no progress deploying an email messaging service through its at-seat video systems.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT This column is Copyright © 2009 Condé Nast Inc. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.