Gogo CEO: T-Mobile deal is start of a trend on who pays for in-flight services

Gogo likely will make deals with other wireless carriers or companies to make texting and other capabilities available onboard airplanes, similar to what it's doing with T-Mobile US (NYSE:TMUS), Gogo's president and CEO said during an investor conference Monday.

Michael Small Gogo CEO

Small

"I think you will see some, and that will help growth rates and average revenue per aircraft in the near term," said CEO Michael Small at the UBS Global Media and Communications Conference in New York City.

Since Sept. 17, Gogo and T-Mobile have been offering free in-flight texting and voicemail capabilities to their customers on all Gogo-equipped U.S. airline aircraft. T-Mobile customers can send and receive text and picture messaging as well as visual voicemail over Gogo's in-flight Wi-Fi system on more than 2,000 commercial aircraft operating in the U.S.

"We've had early usage trends and like everything, T-Mo… they're working on which of their devices work on Wi-Fi and they're going through that whole thing and we're going through it with them. It clearly works. It's clearly not on every device yet," Small said. "I think what's instructive about T-Mo is where some of the revenue is going to come direct from the passengers," some of the revenue will come direct from airlines, and some will come from third parties, "but there's also the issue of what do we give away to passengers versus not."

"I do think things like texting are likely to be free, paid by someone else," either by the airline or a third party. The issue is what's free, "and I think we're getting to learn that out of the T-Mo deal, as well as how you bring third parties in." Having third parties pay for services like texting is likely to be a trend throughout the industry, he said.

Asked if the company is interested in acquiring spectrum like AT&T's (NYSE: T) WCS if that were available, he pointed to the company's technology roadmap, saying capacity relief will come in the form of ATG-4 deployments through 2015 and 2Ku through 2016 and 2017. "So you're thinking about after that, and anybody who tells you... they can rush to market in a week or a month, they're kidding themselves." The regulatory certification process to get to new commercial grade products manufactured takes a long time, he added.

"We have the path to 100 Megabits per second with satellite with 2Ku and we are actively now figuring out how to get to that same kind of speeds with an air-to-ground solution," he said. "I would say that an air-to-ground solution by itself is no longer competitive."

A high percentage of planes will be equipped with satellite, and "I would say it's almost too late to get into the business strictly with an air-to-ground network," he said. For those already in the business, there are certain cases where offloading traffic with an air-to-ground network makes sense. "We will look for more spectrum," he said, but also "for the spectrum to be valuable to us, it has to be not useful on the ground." There are a lot of oddball cases where spectrum is only valuable in the sky due to due to interference on the ground, and the company will look at those situations, he added.

The company is in discussions with airlines now about adding the new capabilities. Last month, the company received a supplemental type certificate (STC) from the FAA to install Ku-satellite connectivity service on Boeing 777-200ER aircraft operated by Delta Airlines.

Asked if he had any insight as to why AT&T exited the in-flight wireless business, he quipped: "They came to their senses," adding that he could not come up with a strategic rationale for the telco to try to compete in this space given the requirements of aviation on a global scale. He did not say whether his company has talked directly with AT&T. "We talk with all the wireless providers" and all the spectrum holders, he said, declining to say anything beyond that.

For more:
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