Phone in the sky: real market or not?

Phone in the sky: real market or not?

While the US regulator recently auctioned radio spectrum for telephony and data on air travel (winners were AC BidCo and JetBlue), question raised on the timelessness of the current system AirFone, run by Verizon. Verizon has two years to re-equip several thousand planes for a non-renewable in-flight phone license that expires in 2010. That short to recoup pretty high investments. In addition, Verizon did not fiercely bid for air-to-ground spectrum, leading to the rumor that Verizon could choose to shut down or sell AirFone business. In addition, the big aerospace company Boeing failed to turn a profit from its ambitious in-flight Connexion Internet venture, and is mulling selling the unit or shutting it down. What a poor picture for a market considered as as a “must be there” only few years ago. Basically, there is a misjudgment of the passengers appetite to pay for internet access and VOIP fees. And airlines are not strongly pushing to re-equip their fleet with new products and cabling, immobilizing their planes for weeks.

On the European side, the situation is not so clear. The cellular technology will be used; OnAir - the joint venture between SITA and Airbus – will launch the GSM/GPRS mobile services in February 2007; the infrastructure is provided by Siemens while Inmarsat will provide satellite connectivity. But the more important is not there yet: authorization of using GSM services on aircrafts. The regulatory process is still ongoing, and CEPT plans to make its recommendations to national regulators in 4Q06. Besides this consideration, and besides safety consideration, it is not sure the business case is more viable in Europe or Asia than in the US.