Gogo to ease ATG network congestion by moving traffic to 2Ku satellite-based service

Inflight Wi-Fi provider Gogo acknowledged that its U.S.-based ATG wireless network is suffering from congestion, but the company hopes to alleviate that situation with the launch later this year of its satellite-based 2Ku service.

"As revolutionary as it was at the time, our ATG network is now congested. On top of that, the addition of regional jets has added pressure to that network," explained Michael Small, Gogo's CEO, during the company's quarterly conference call, according to a Seeking Alpha transcript of the event. "As expected, these constraints slowed ARPA [average monthly service revenue per aircraft online] growth. We know more capacity is coming starting in 2016 and until then ARPA growth is expected to moderate as we continue to manage through our current network congestion."

Small reiterated Gogo's plan to offer satellite-based 2Ku Internet connections, via satellite providers Intelsat and SES Ku, sometime later this year. The move, he said, would alleviate congestion on the company's existing ATG network in the United States. Gogo's ATG in-flight Internet service launched almost 10 years ago in the 800 MHz band using Qualcomm's EV-DO technology.

"Every day we invest in the ATG network to squeeze out more capacity and we're doing that for the last five years and we'll continue to do that. But it will -- it can only yield so much, there is just laws of physics with 3 MHz of spectrum in use. We are maybe the world's most efficient user 3 MHz of spectrum," Small said.

Gogo has said that its 2Ku services will provide airline passengers with Internet speeds up to 70 Mbps, far faster than the 1-3 Mbps services it currently provides via its aging ATG system.

"There is a double benefit of 2Ku: The planes can install it, of course, get a lot more capacity but they come off to ATG network freeing up capacity for the remaining aircrafts on the air-to-ground network," Small said, noting that almost 500 aircraft are set to be outfitted with connections to the company's forthcoming 2Ku system.

Most recently, Latin American airline company GOL said it will install Gogo's 2Ku services, including the company's new IPTV solution -- Gogo TV -- on all its 140 aircraft.

"Getting 2Ku to market this year is critical. As far as we can see, 2Ku is the best global solution to market," Small said. "We believe it wins on four key factors: cost, coverage, capacity and reliability. And specifically in North America it will enhance the passenger experience and free up capacity for planes operating on our ATG network when Delta begins [to] deploy 2Ku in 2016."

Overall, Gogo reported record quarterly revenue of $121.2 million, up 22 percent year-over-year. The company's overall profit increased 31 percent year-over-year to $28.8 million during the second quarter. However, as investment firm Evercore pointed out, the company's "take rate" decreased to 5.9 percent from 7.2 percent in the first quarter. Gogo's take rate is the percentage of airline passengers who pay for the company's in-flight service.

But Evercore analysts maintained a relatively positive outlook on Gogo, noting that "we believe the … launch of 2Ku should reduce network pressure, enable higher take rates and unlock ARPA growth."

For more:
- see this Seeking Alpha transcript
- see this Gogo release

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