In my previous blog (link) I suggested to take the COVID-19 crisis as an opportunity for airlines to review and reframe their connectivity strategy at large, such that it can truly accelerate the digitization of air travel. The target must be nothing less than to provide an affordable broadband connection for every aircraft and every passenger. Too ambitious? Not at all – what the telco industry achieved already a decade ago on the ground can be achieved for Inflight Connectivity (IFC) as well, by extending some of the proven business principles and technologies of mobile communications into the skies. I believe that three things matter most:
- Firstly, airlines require real broadband data pipes between their aircraft and the ground. Throughput is a product of both capacity and latency – in other words, no matter how fat a pipe is, with a second of latency it will always deliver poor performance. Moreover, the full capacity needs to be available for every aircraft, also in busy airspaces, thus density directly drives performance as well.
- Secondly, airlines need data tariffs from their IFC providers that do not penalize usage. Charging airlines by volume of data is one of the root causes for today’s widespread “we will save ourselves rich” behavior. Instead, tariffs should be based on throughput. Only when following this fundamental rule, mass adoption will happen and drive down the cost – like it happened on the ground.
- Thirdly, instead of today’s vertically integrated solutions the aircraft and the IFC service need to be unbundled. Or simpler: the aircraft is one thing, the network that it connects to is another. One of the key achievements of mobile communications is a high degree of standardization, which not only fuels technology evolution but also assures affordable prices for end users.
Do you still remember the launch of the first iPhone in 2007? Following the fulminant market disruption, it set off a virtuous circle of application innovation and the unprecedented proliferation of mobile broadband services. The exponential growth of mobile data traffic since then is a testament to that. The ingredients for a similar disruption in the skies are available today: Air-to-Ground (A2G) is the technology that features the performance required by connected aircraft, supports flat data tariffs for airlines, and is built upon 4G and 5G standards for economies of scale and an open ecosystem. What’s more, together with Mobile Network Operators we can also establish a business model that meets the specific financial requirements of airlines post COVID-19 – here is what I mean:
- Zero CAPEX: cash is king, and avoiding CAPEX is more important for airlines than ever. Mobile Network Operators, who have not been hit nearly as hard by the current crisis, could step up and invest into the A2G terminal equipment, as a piece of infrastructure that yields returns for years.
- 100% variable OPEX: these days, variable cost is better than fixed cost. As no one can reliably predict how quickly the airline industry will rebound, it is essential for IFC providers to construct tariffs that generate cost to the airline only when an aircraft is flying.
- Zero CAPEX & OPEX: some airlines might avoid cost altogether. In addition to investing into the A2G terminal equipment, Mobile Network Operators could also provide the cabin Internet service, optionally with the support of sponsors and advertisers.
To expand on the last point: for Mobile Network Operators, unlike airlines, connecting people is the core business, and their capabilities to market, sell, and take care of subscriptions are undisputed. By once more extending proven business principles and technologies of mobile communications also into the cabin, we could remove the three key barriers to adoption and boost usage of cabin Internet services:
- Firstly, passengers expect a real broadband service. Again, latency matters as much as capacity, given the vast amount of TCP/IP sessions initiated for a single web page, and the frequent device-cloud transactions of most business applications.
- Secondly, a basic cabin Internet service cannot cost 25-50% of a monthly mobile subscription. Instead, we need to change today’s high-price-low adoption reality to a low-price-high-adoption paradigm.
- And thirdly, the service should be accessible seamlessly and be available from entering the cabin to exiting it at the destination. This translates to automatic authentication and billing of passengers through their regular mobile subscription. And it means connecting the aircraft from gate to gate, thus calls for a technology that can cope well with high densities of aircraft parked on the apron.
Again, the ingredients for making all of this happen are available today. The proposed financial models greatly reduce the exposure of airlines, in response to the current COVID-19 situation. Some people still might say: all good, but not now. But I think that ubiquitous connectivity as a driver of cost reduction as well as for ancillary profit have never been more important for airlines. More about that in part 3 of our little series.
About the author: Dirk Lindemeier is Co-Founder and Chief Commercial Officer of SkyFive. He previously spent 19 years with Nokia in telecommunications, and before that 10 years in military aviation. Until today, Dirk also enjoys being a private pilot.