Major telecommunications firms face barriers to organically becoming inflight connectivity providers in the United States, though it’s logical for them to be interested in the market, the CEO of Global Eagle Entertainment told investors and analysts on 2 September. Just over one week later, the US aviation industry has been given a tangible example of how telcos can climb aboard in the form of T-Mobile’s new partnership with Gogo.
Speaking at the Citi 2014 Global Technology Conference, Global Eagle’s Dave Davis said, “If you look at major US carriers, they are part of long-term contracts, either us or Gogo, so it’s hard for new entrants to get into the space. Would it make sense for one of these large telcos to get into this space through acquisition? Possibly. That would be a way in.” But he also suggested that partnerships between telecommunications companies and incumbent connectivity providers could also make sense. Davis can relish in his soothsayer status right now.
T-Mobile yesterday announced a partnership with Gogo that will allow T-Mobile customers to send and receive text and picture messages as well as visual voicemail using their own smartphone and phone number over Gogo’s inflight Wi-Fi system – completely free of charge. To access the free messaging and voicemail services, T-Mobile customers will need to have their Wi-Fi Calling-enabled phone in airplane mode and connected to Gogo Wi-Fi, which is available on some 2,000 aircraft.
Of course, this is not the first time that T-Mobile and inflight connectivity have been linked together. T-Mobile is the preferred wireless Internet service provider for Panasonic Avionics’ eXConnect Ku-band satellite-supported connectivity solution.
But Gogo’s wholesale deal with T-Mobile is different. You might even call it somewhat special right now. Firstly, it’s a low-bandwidth service, and won’t sap too much of Gogo’s precious air-to-ground (ATG) connectivity pipe. Secondly, it will ensure that inflight connectivity can now reach a new segment of traveler outside of the traditional business traveler, including young people.
Interestingly, some industry observers believe a sponsorship agreement between Verizon and Gogo would also be compelling. “Verizon could agree to pay $20 million per year to sponsor Gogo for its customers, for instance,” noted satellite industry consultant Tim Farrar in a recent conversation. That might be less sexy to some than a JV or acquisition, but it’s logical.
However, Gogo’s deal with T-Mobile is understood to be exclusive for a period of time, which is a marketing coup for T-Mobile, as it means it is the only telco in the United States to be able to tout such an arrangement at this time. Gogo declined to comment on the terms of its agreement with T-Mobile.
According to Global Eagle, which provides Ku-band satellite-supported connectivity to Southwest Airlines, we should expect to see more of these sorts of deals between telcos and inflight connectivity providers. “Generally, I think it makes sense for telco companies to offer inflight connectivity as part of their suite of product offerings to a passenger. So in other words, I have AT&T on the ground; if I get in the air, it works. There is logic to that.”
AT&T has obviously already signaled its intent to launch its own 4G LTE inflight connectivity service next year. It’s certainly plausible that AT&T could crack into the market by footing the bill on connectivity hardware for the likes of ultra-low-cost carriers Spirit Airlines or Allegiant, which to date remain disconnected. And plenty of business aircraft still need to be fitted with connectivity. Could AT&T snatch American or Delta away from Gogo? Chicago-based Gogo’s long-term agreements with the airlines will serve as a barrier for a spell. So too will arrangements such as the T-Mobile deal if they’re extended or enhanced.
One thing is certain, telcos are now eying the hotly competitive inflight connectivity market. We note, with interest, that Verizon is a Gold Sponsor of Future Travel Experience’s forthcoming “Up in the Air” conference in Las Vegas (see bottom right), and that AT&T is exhibiting at the APEX Expo next week.