[Via Satellite 12-09-2015] Gogo CEO Michael Small is bullish about what the company’s new satellite-based connectivity offering will bring to the In-Flight Connectivity (IFC) market, including loosening bandwidth constraints and aftermarket domination. Hot on the heels of the FAA’s certification of the 2Ku technology and ahead of the offering’s rapidly approaching commercial launch set for the end of this year, Small spoke at the UBS Global Media and Communications Conference in New York on Dec. 8, about how the company expects the new offering to upset the IFC playing field — and what may stay the same.
Kiss Capacity Constraints Good Bye (For Now)
“We have been so capacity constrained we have been doing everything we can think of, practically, to prevent sales mainly raising price,” said Small.
To date, five airlines are signed up to deploy 2Ku on aircraft in their fleet: launch customer Delta, Virgin Atlantic, GOL, AeroMexico, United, Japan Transocean, and Air Canada. As aircraft on these fleets transition to 2Ku, capacity will free up in Air-to-Ground network and enable more bandwidth in all areas of the Gogo network — such as Delta who has committed to transitioning 250 aircraft from ATG to the satellite solution by 2018.
“There is zero problem for a long, long time in selling more if we have more bandwidth available,” he adds. “I no longer feel our back is against the wall on capacity.”
Don’t Expect Super-Sonic Speeds
While Gogo is still claiming that 2Ku is faster than competitors’ offerings, coming in at speeds of over 12 megabits per second for the device, even with simultaneous streaming on more than 40 devices, Small thinks the speed aspect may be overblown.
“The speed thing is getting over played at this stage. When we had 60-some devices going on [our test] plane, we had everybody streaming Netflix and Hulu and Amazon Prime and I don’t know exactly how many sessions were going but there were a minimum of 50 streamers guaranteed. [Eventually] everybody was still browsing okay but the speed test had fallen to a handful of megabits and everyone is going, ‘Oh well that’s awful,’ but then they’re going ‘Wait, I’m doing everything I want to be doing here,’” said Small.
He points to the fact that when it comes to speed, eventually the problem becomes an economic one as carriers have to decide on the numerical level of service they can provide per month and still make the numbers work.
“It’s no longer physics, it’s now economics,” said Small. “We can maybe double the speed, take the speed from 70 Mbps per plane to 100 Mbps or better per plane; that’s nice, but can we cut the cost in half again is the bigger issue.”
In lieu of speed, the company is emphasizing reliability.
“Now airlines just want it to work,” said Small. “To install stuff on airplanes is hard. To service planes everywhere on the face of the globe and to have spare parts available and to have trained personnel operating procedures in place, all that is very hard. Number one, they want to know they are putting the right thing on the plane, and they equate that with fast a lot. And, number two, they want to know that you can take care of it and make it work every day; they can’t have planes being delayed because they are fixing this stuff.”
Operational Connectivity Could be the Key to Unlocking the $30 Billion Industry
While the demand for passenger connectivity kicked off the IFC revolution, there is no doubt that airlines are beginning to see the value in savings by operational efficiencies on the connected aircraft.
“Passenger connectivity we actually think is likely the minority of the [$30 billion] number,” said Small, pointing to connectivity for the purpose of enhancing operations as the key to unlocking the total value proposition. “We now see just how much potential savings there are in maintenance costs and fuel costs and eliminating delays, in improved passenger experience the airlines can provide …. I think the opportunity for savings is unambiguous,” he added.
Panasonic Still Dominates the Linefit Landscape
While Gogo may “dominate” in the retrofit market, Panasonic Avionics, as a supplier to the aircraft market for In-Flight Entertainment (IFE), still may have an edge when it comes to line-fit installations, according to Small. Panasonic, which has equipped more than 800 aircraft with IFC, has provided mainly line-fit paths to connectivity while Gogo relies on aftermarket upgrades.
“Historically they have used the embedded IFE as an entrance into the business,” said Small. To combat this, the company knew they had to solve the line-fit problem, but, he added, “the problem with solving the line-fit problem was with what technology?”
Gogo is looking to certify 2Ku as the solution to that problem, and Small says the company is “well underway” to certifying 2Ku as a line-fit option for aircraft.
The Rest of the World is Coming
“The airlines think about touching their planes the way you or I would think about getting a knee or a hip replacement. You may know it’s necessary, you may know you really want it but you are still really wary about doing this and thinking of all the reasons to put it off,” said Small.
To convince the roughly 10,000 aircraft waiting for IFC in the rest of the world to jump on board, Small says the 2Ku offering will have to prove it can work well across the globe. Meanwhile, airlines both inside and outside of the U.S. are turning to competitors such as ViaSat, which snagged a contract to equip 10 aircraft in Virgin America’s fleet with streaming-video capable Wi-Fi. Inmarsat has also emerged as a major competitor abroad, announcing a 10-year strategic partnership earlier this year to equip Lufthansa’s European continental fleet with IFC.
Gogo is making attempts to capture the global market share, opening new sales offices and growing support in the form of spare depots and maintenance facilities, but bringing the investment in satellite-based IFC online is the company’s “first big whack at it,” according to Small.
And as Delta’s international fleet jumps on board with the company’s 2Ku offering, Small is hoping it will put pressure on un-equipped fleets such as Air France and British Airways to jump on board. “There’s going to be nothing better than us flying the planes to make [the airlines] feel better about making that decision,” he added.
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