Boeing to sit out FCC airwave auction

In Oscar Wilde's The Ideal Husband, Lord Goring says that "it is always nice to be expected, and not to arrive." He might have been referring to Boeing. The premier plane manufacturer surprised everyone by saying it would not be among the 12 potential bidders in a federal auction of airwaves which will allow wireless broadband Internet access on planes flying over North America. The FCC last Friday unveiled the names of the applicants, which include JetBlue Airways and Verizon Airfone, a unit of Verizon Communications. Boeing has decided that, for now at least, it will stick with a competing satellite-based technology which it has spent hundreds of millions of dollars to develop and market. Boeing, through its subsidiary Connexion, is the only company currently offering WiFi service to airline passengers. Twelve airlines, all international carriers, offer Connexion or plan to do so, but otherwise the service has been painfully slow to take off. The main reason is cost: On-the-verge-of-bankruptcy, U.S. airlines cannot afford Boeing's system, which costs about $500,000 to install per plane.

Analysts say, however, that the market for on-board WiFi service appears to be opening up as the financial condition of airlines starts to improve and customers demand better service and more perks. Analysts say the FCC auction may drive a widespread implementation of WiFi in the skies, and a second broadband system could pose a competitive threat to Connexion sales. The earliest a second broadband system would be available to airlines is mid-2007. Verizon and other bidders say the air-to-ground links they contemplate would be cheaper to install and less expensive to consumers relative to Boeing's system. Verizon has indicated it would charge $15 or less per flight. Boeing offers four levels of Internet service, ranging from $9.95 for one hour to $26.95 for 24 hours. Passengers also can watch four TV channels: BBC World, EuroNews, MSNBC and CNBC.

Boeing's decision not to take part in the bid is partially based on the advantages its satellite-based technology enjoys over the air-to-ground technology its competitors will be using: Satellite communication is available everywhere, while the air-to-ground system is limited to domestic flights because it does not work over oceans. Analysts doubt, though, that Boeing will be watching with equanimity as competitors carve up the domestic market. Henry Harteveldt, vice president of travel research at Forrester Research, said, "I wouldn't rule out Boeing becoming partners with one of the winning bidders and getting in through the back door."

For more on Boeing's WiFi strategy:
- see Ameet Sachdev's Chicago Tribune report

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