AirCell won the exclusive rights in June to the air-to-ground spectrum that will enable it to provide wireless broadband services on airplanes. The goal is to have a network built by the middle of next year with service up and running by the end of 2007. The Louisville, Colo.-based company was the highest of four bidders, paying $31.1 million for the 3-megahertz license. I recently spoke with Tom Weigman, AirCell's senior vice president of wireless services, about how this project will fly.
High-speed wireless connection in an airplane is a no-brainer to me, but we've already seen failures in this area with Boeing's Connexion service. What will be different for AirCell?
First, we think we are starting out to try and fill the last great frontier in the domestic U.S. You can go virtually any place except on an airplane and get connected the way you want to. We'll be offering a WiFi hotpot in the sky, connected with EV-DO technology on the ground, allowing customers to sustain connectivity where and when they want to.
It's helpful to look structurally at the difference between how we are approaching and the way Boeing was. Their product weighed 800 pounds, and it was introduced in a world where every pound is important. Airplanes have a massive program to get rid of pounds. Connexion was a satellite product that required a specialized antenna that was enormous and induced a drag on the airplane. It also required that an airplane be out of service for two weeks so it could be installed. Estimates are that it cost $500,000 for Connexion equipment and that induces a real high hurdle to the economics of making anything work. That, in addition to fixed costs with transponders, made economics virtually impossible. People who experienced the product actually liked it, but they didn't have enough frequency of travel internationally to get in a habit of using it. They were usually sleeping. Only half of each leg in the U.S. had the service.
We have a dramatically different cost structure than they did. The economics are extraordinarily different. We have a far less serious challenge than they did. We are comfortable that the penetration rates are achievable given the current PC carry rate on airplanes. This is a classic consumer adoption story. You have to have a need present, and people have to be aware there is a solution in place. We'll be present on enough airplanes and making consumers aware. It will take a couple of times for people to recognize that airplanes are significantly penetrated so they can look forward to it being there. They want it to be at a point where they can depend on it's going to be on the airplane. They are not going to depend on that if it's not going to be there every time. That inherently increases likelihood of them using it.
Can you reveal how the company will structure pricing of the new service?
It will be a marginal premium to what users can get at the airport. We're not prepared to tell right now, but it will be in the range of what WiFi costs at premium hotels. We very much want to make this accessible and not a "Gee, I have to think about it" decision.
What type of partners are you talking to?
We are intent on talking to the iPasses, Boingos and T-Mobiles to make this a component product, an extension of their capability. We've had discussions with some already, and one of the things we're trying to be attentive to is interesting circumstances about being a sole provider and we think we can earn a bit of a premium. Clearly with Boingo and T-Mobile you can pretty much have a good coverage rate for a fast introduction. With iPass, there is a whole world of enterprise capabilities.
What about the possibilities beyond just high-speed connectivity?
We can't speak in specifics but there is clearly an opportunity to do the WiFi hotspot with a server capability in the airplane that is destination oriented. As we look at whole opportunity, there is a place where interactivity meets wireless, meets on-demand, meets information. We're also struck by the fact that it's a world where the traveler is doing business and has a special circumstance for communications. The world of e-commerce is a potential. Airlines we have spoken with are constantly asking us about other applications, and we're trying to have early discussions with them about what their needs are. There is also this whole operational aspect and allowing services like engine monitoring and safety and security updates. This capability brings a lot of potentially different spins. But task one is being able to deliver a flawless WiFi experience in the sky.
Do you have any plans for wireless voice service?
That's one of the most interesting yet the prickliest. We understand the potential and have the benefit of at least a few live test markets with European carriers. And Quantas is conducting programs with voice on board. We're attentive to experience that is going to be there. We don't see ourselves as the ones to make that decision. We want to begin with WiFi capability and as we can get permission to provide picocells for GSM and CDMA, we'll be able to put in that capability. It depends on the choice of various airlines, and we're dealing with social issues and how attractive it is to have someone next to you talking on the phone. Voice over IP will be much the same. The ability to add or block that capability will be at the will of the airlines. Our real desire is Internet connectivity, email and access to VPN. That's the real core.
How would you characterize the interest of airlines at this point?
There are very different stages of levels of interest. We've had some level of discussion with virtually every airline. Several are very interested and there are others just by their very nature that are interested but want to be a fast follower. Frankly, we're encouraged by the positive reception.
Tom Weigman Dossier
Current Reading: The Nutmeg of Consolation-by Patrick O'Brien, favorite recent read--The Devil in the White City by Erik Larson
Favorite Mobile App: Vindigo--I travel a lot, and man DOES live by bread alone.
Current Project: Launching AirCell's new broadband service--who the heck has time for anything else but that and NCAA basketball?