It's official. Two years after Boeing commercially launched its Connexion inflight broadband service on a number of airlines, Boeing is pulling the plug after failing to find someone willing to take it over.
On the surface, the news is somewhat surprising in the sense that there was little wrong with the actual technology behind it. This comes from personal experience - as reported in this space last year, I spent an hour in Hong Kong airspace on a Connexion test plane accessing the bandwidth-hungriest content I could think of - Flash animation sites, 18MB Japanese TV video clips, MP3s (legal ones, of course), streaming audio/video. I even uploaded 600KB photos taken on the flight onto a Flickr account and my personal blog. It was no different from using a Wi-Fi hotspot on the ground, although a fellow journo who tried Skype reported some latency.
But of course it wasn't the technology that was the problem. Not exactly. There have been reports that Connexion's equipment was bulky and heavy, neither of which are cost-effective on an airplane, and may have been a factor that contributed to the hefty $29.95 price tag for unlimited connectivity on a long-haul flight.
But it's the economics that got Boeing in the end. According to consulting company Telecom, Media and Finance Associates (TMF), Boeing was seeing something like 5% of passengers on Connexion-equipped planes using the service - which was in line with expectations for the first year of service, but it wasn't growing fast enough. The amount of usage at the prices being charged worked out to around $110,000 a year per aircraft in revenues (not including the percentage of revenues that went to the airlines or ISP partners). Given the current installed base of commercial and private/government aircraft, TMF says, at $80k a year per commercial plane and $50k per private plane, Connexion would have made $11 million a year from the service. The trouble is, Connexion's opex was running an estimated $150 million a year. The leased satellite capacity and network operating costs alone cost $50 million.
The math speaks for itself.
The economics weren't so good for the airline industry either, especially in the US. Even before 9/11, the airline business was in bad shape. Afterwards, so many airlines were watching their budgets that the time and expense of outfitting a commercial jet for broadband wasn't worth the expense.
The double-barreled question looming over the Connexion shutdown now is: is the concept of inflight broadband fatally flawed, and will this also apply to inflight cellular‾
Indeed, Connexion wasn't the only game in town. In the US, AirCell and LiveTV are planning their own in-flight Net services via licenses to operate air-to-ground communications services, while SITA/Airbus joint venture OnAir is planning an inflight service utilizing Inmarsat's SwiftBroadband service on its I-4 satellites.
Opinions differ, but the outlook isn't encouraging. With Connexion done and Verizon shutting off its inflight phone service at the end of this year, Inmarsat is the only major survivor of the inflight comms sector - and it's still only registering five minutes worth of inflight calls a day.
No wonder the analysts at TMF are skeptical. Maybe inflight broadband is one of those things that sounds like a good idea but in reality most people won't use it - not enough to cover the installation and opex, anyway.
Perhaps. But I am an optimist about these things. Comms usage is changing all the time, and over time passengers will demand the same level of connectivity in the air as they can get on the ground, whether they get it in coffee shops, city parks or moving trains. I don't know if that will help the next wave of inflight comms contenders and their sleeker, cheaper technologies - certainly it won't until the airlines have sorted themselves out enough to afford the installation. Or at least until the price of fuel comes down by a significant amount. But eventually broadband will be a standard feature. Just perhaps not this decade.