Gogo comes out swinging as battle for IFEC supremacy heats up

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Buoyed by a healthy first quarter earnings performance, including a 35% year-over-year increase in revenues, inflight connectivity provider Gogo today came out swinging against AT&T’s attempt to usurp the Chicago area company’s market dominance in the US, saying it’s not clear if the telecommunications giant’s spectrum is “clean and ready to go” and warning that AT&T will have to “navigate” its way around a lot of intellectual property in the air-to-ground space before launching its 4G LTE service.

“It is a long process” to get into the inflight entertainment and connectivity business, noted Gogo president and CEO Michael Small. In addition to receiving Federal Communications Commission (FCC) approval to dedicate new spectrum to ATG, AT&T will “have to get all [connectivity] equipment certified by the FAA and then specific installations on specific aircraft approved”, Small reminded analysts and investors.

Furthermore, he suggested, the nationwide network AT&T uses for ground communications “will not be very useful for the air”. For example, “you need to see over 100 miles in every direction on a cell site so it’s got to be on a mountaintop”, which is not usually where a traditional cell site is located on the ground. Also, “you need fiber to all the cell sites” if the service is to be high speed “and I guarantee the cell sites on the ground are generally 2G”.

In short, he says, “there is a lot of work”, ahead for AT&T, “and what they have on the ground won’t be useful for the aero market. So everything “would have to be perfect” for AT&T to hit its benchmarks for launching the service at the end of 2015.

It would be foolhardy to discount the competitive threat of AT&T to Gogo, but some industry insiders believe AT&T has bigger fish to fry. As reports broke on 1 May that AT&T is eyeing an acquisition of DirecTV it became increasingly apparent that AT&T’s inflight entertainment and connectivity (IFEC) ambitions are well and truly global.

The company is making a play to take over content delivery whether at home, in the office or on aircraft. If AT&T snatches up DirecTV, not only will this greatly increase the company’s terrestrial footprint, but it will give it valuable spectrum to support airborne IFEC. And of course, AT&T would automatically have a presence on the Continental Airlines portion of United Airlines’ fleet as well as JetBlue Airways’ fleet.

AT&T can then use that segment here to push outside of the United States, very much like Gogo is trying to do with its unique new Ku-band connectivity solution, 2Ku . But in contrast to Gogo, AT&T has the financial means and potentially the in-house talent to broaden its horizons faster.

A DirecTV buy would certainly shorten the length of time it will take for AT&T to crack into the IFEC market in the domestic United States. Then it could leverage its relationship with Honeywell – which is providing hardware for the 4G LTE service – and Honeywell could in turn leverage its exclusive relationship with Inmarsat. Honeywell is providing connectivity hardware for Inmarsat’s Global Xpress Ka-band connectivity service, and says it is already gearing up to package hybrid ATG-Ka solutions with AT&T.

Armed with this sort of arsenal, the entire Global Xpress camp could prove to be a fierce competitor to Panasonic Avionics, which holds a 70% share of the embedded IFE market, and has used its position to score myriad international customers for Ku-band inflight connectivity. “AT&T could be an adversary to Panasonic,” warns former Panasonic Avionics director of product information security Michael Dierickx, who now serves as chief information security officer for General Motors Global Consumer Connect.

Since United has opted to use the ViaSat Exede service on its Continental narrowbody fleet – and is looking to tag more aircraft for this service – and since JetBlue is also an Exede customer, it’s possible AT&T would be open to partnering where it makes sense. But if AT&T is able to offer airlines an even cheaper solution – with a comparable quality – “they’ll take it in a heartbeat”, suggests Dierickx, who believes AT&T could do “exactly what Panasonic and Thales do; i.e. suggest that airlines try its broadband on one aircraft for free and if the carrier likes it, they’ll contract for the entire fleet”.

Nobody doubts that Panasonic will fight tooth and nail to retain and grow its market share. The company is the most formidable adversary in the IFEC world. But for the likes of Gogo to thrive, it must continue to innovate, and remain on the bleeding edge of technology.

Gogo’s Small says that’s exactly what the firm is doing. “Our NextGen solutions, both GTO and 2Ku will be faster and will be flying sooner than AT&T’s proposed  solutions. We keep seeing competitors talk about what they’ll do tomorrow and comparing it to what we did yesterday and that’s an erroneous comparison. Gogo keeps winning the today comparisons; that’s why we have 8,000 plus aircraft between business aviation and commercial aviation, and the bottom line is we’re the company with the shiny new products and intend to keep it that way.”

AT&T could not be immediately reached for comment.

1 Comment

  1. I’m not so sure I agree that the DirecTV buy gets ATT internet on board planes any sooner. That all runs via LiveTV and it does not seem likely that Thales is going to be too excited about giving away their market to AT&T. The IP issues will remain significant for AT&T to overcome on that front.