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AirCell Set for Takeoff

Significant deployments of WiFi services on commercial airliners are still more than a year away, but most major airlines will offer onboard Internet connectivity by the end of 2008, according to executives at Aircell Inc. , the Denver-based airborne communications provider that is trying to succeed where Boeing, with its highly touted Connexion service, failed.

AirCell, which was founded in 1992 and has long been the leading provider of communications systems for business jets, outbid Verizon Wireless and other major carriers with a $31.7 million offer for 3MHz air-to-ground bandwidth in the FCC spectrum auctions last summer. Jack Blumenstein, who has been the CEO of AirCell since 1996, says that the company is in talks with major carriers and expects to make announcements of agreements to install WiFi services on commercial planes by the end of the first quarter of 2007.

Boeing shut down its service in August after spending up to $1 billion to develop the on-board Internet-access service. (See Boeing Disconnects Connexion.) When it was launched in 2000, revenues from inflight connectivity for passengers were forecast to eventually hit hundreds of millions a year.

Connexion was doomed by a host of factors, including eye-popping fees ($10 for the first hour, $27 for 24 hours) and massive equipment that added as much as 600 pounds to the weight of the aircraft.

"Over the last six years, we have invested substantial time, resources, and technology in Connexion by Boeing," Boeing chairman and CEO Jim McNerney said in announcing the shutdown. "Regrettably, the market for this service has not materialized as had been expected."

That's not so, says AirCell CEO Blumenstein: "I've always felt that the model we have solves all the problems that Boeing faced. And even if we turn out to be wrong about that, this is still a great business for our general-aviation customers, who are dying for broadband equipment and service."

AirCell uses a ground-to-air system, instead of the satellite-based link that Connexion employed, comprising three distinct networks. The first is the ground-based cellular network that will include around 70 conventional base stations to provide coast-to-coast coverage in the continental U.S. Service over Canada and Mexico, and the Caribbean will follow shortly after the U.S. launch, says Tom Myers, the company's marketing director. (AirCell has no plans at this point to provide service on transoceanic flights, except during the periods they're in North American, Mexican, or Caribbean airspace.)

Second is the ground-to-air link, which will use the same EV-DO Rev A technology currently being deployed by major wireless operators including Sprint Corp. (NYSE: S) and Verizon, running over the 3MHz spectrum that AirCell now owns. "We use a little bit of our secret sauce to make it support broadband, high-speed communications at 600 miles per hour, 40,000 feet in the air," says Blumenstein.

Within the airplane cabin, a standard WiFi hotzone will take over, with one or two wireless access points providing coverage to the entire plane. The system, AirCell claims, will provide "a true broadband experience" -- i.e., in the neighborhood of 1 Mbit/s downstream, for every passenger on board.

The power of this model, says AirCell's senior vice president for wireless services, Tom Weigman, is that each of the three stages works on standardized, off-the-shelf equipment that is currently in widespread use.

"We think of this not so much us getting into the airline business," says Weigman, "as us filling that last gap in the wireless connectivity world, which has been so profitable in so many other dimenions."

AirCell's system has significant advantages over Connexion in terms of weight (less than 50 pounds per plane) and in cost (around $100,000 per plane compared to Boeing's $1 million). What's more, the system can be installed overnight in an aircraft at an airport gate -- eliminating the need to take planes out of service for installation, a huge factor for struggling airlines.

The cost to passengers, says Blumenstein, will be comparable to terrestrial hotspot services: "You'll walk onto the plane and be able to buy a retail trip that day for about same as you'd pay in a Starbucks -- at or around 10 bucks a session."

Despite the demise of Connexion, AirCell faces competition in the wild blue yonder: In the same FCC auction in which AirCell picked up the 3MHz spectrum, a subsidiary of budget carrier JetBlue called LiveTV LLC purchased a slice of spectrum in the 1MHz frequency band that can also be used to offer ground-based connectivity to airliners.

— Richard Martin, Senior Editor, Unstrung

id4johng 12/5/2012 | 3:31:22 AM
re: AirCell Set for Takeoff Doesn't Aircell have the 'build it and they will come' problem? After all, their infrastructure spend must be $100m or more for towers and ground equipment, and their backhaul costs must be high. So does the first customer have to just believe Aircell are going to find and spend all that money? From what I have seen, there's no announced move to deploy yet, perhaps because there aren't any customers yet. Seems like a chicken and egg thing to me. Also, is there a reason to suppose the market can support these startup costs? If I was the investor, I'd be wondering why Verizon walked away...
joset01 12/5/2012 | 3:31:21 AM
re: AirCell Set for Takeoff Personally I'm curious to see if Jet Blue end up doing something with the spectrum they won. I know they have definitely looked at vendors for in-flight WiFi in the past.

Dan
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