AT&T is not wasting any time in developing its planned new 4G LTE inflight connectivity solution, exclusively telling RGN it has begun work with Honeywell on the antenna, and has “built designs for the sites” that will support its first test flights. But the company has also made its broader intentions clear, saying it expects to become a major player in the inflight entertainment (IFE) arena, and is prepared to spend some cold hard cash to make it happen.
The telecommunication giant’s planned air-to-ground (ATG) connectivity offering – which is still on track to launch by 2016 – will compete head-on with the dominant connectivity provider in the US, Gogo, or whomever might snatch up Gogo as a means of quickly entering the super hot inflight Wi-Fi market. After inking a partnership with T-Mobile – allowing T-Mobile customers to text for free – and announcing a deal with Virgin Atlantic to fit the carrier’s existing fleet with its new 2Ku satellite-supported connectivity solution, Gogo is once again the subject of Wall Street chatter that Verizon is eyeing an acquisition of the Chicago-headquartered firm. Such a move would give Verizon instant – and significant – content on some 2,000 commercial aircraft, including Delta Air Lines’ entire mainline fleet, and part of its long-haul fleet.
Irrespective of how the market evolves, AT&T Inflight Connectivity president Michael Coffey says the firm is focused on laying a foundation for its market re-entry (like Verizon, the company famously gave inflight connectivity a try many years go). Building the ecosystem to support 4G LTE inflight connectivity is a crucial first step for AT&T. “We’re working with our network provider, which we haven’t announced – [though] we will – but we’ve been very active in that in terms of getting the build set up. And then we’re also talking with mobile partners as well in order to get the core part of the ecosystem done,” Coffey told RGN late last week at the APEX Expo in Anaheim.
The company’s launch product for the mainland US “will cover both commercial and business aviation”, though AT&T envisages also ultimately serving the general aviation community with ATG connectivity. AT&T confirms it plans to offer a service that allows passengers to connect via Wi-Fi. It has not said if it will also offer inflight GSM/CDMA capabilities, though offering true inflight mobile connectivity together with Wi-Fi would seem like a natural choice from this vantage point, given AT&T’s interest in ultimately enabling people to use their smart phones and tablets in the air as they do on the ground, and across every touch point of their journeys (voice functionality could easily be disabled in-flight).
Meanwhile, airlines have been “very receptive” to what AT&T is proposing, Coffey claims. “I think there is a lot of energy about having another player in the marketplace, somebody who brings in a different level of service, somebody who has a legacy of network experience, which AT&T has. I think there is a lot of interest in the fact we’re bringing a service that’s based on our 4G LTE network that we currently have today. That’s taking advantage of what we have from a legacy business perspective and bringing that strength into an airline…it’s very positive.”
Part of the allure for airlines must surely be AT&T’s willingness to take a hit on the cost of hardware if necessary to land a launch airline in the US. “AT&T has the financial flexibility to structure its deals with airlines in whatever way the airlines want,” says Coffey, noting that while some airlines will want to pay up front for hardware and own it, AT&T remains open to structuring in a way that would see AT&T cover the upfront hardware costs, and glean revenue share later (much in the same way that Gogo cracked into the market). No launch partners have been announced by AT&T, but with offers such as these on the table, they surely can’t be far off. Consider for a moment that ultra low-cost carriers Spirit Airlines and Allegiant have yet to select an inflight Wi-Fi partner.
AT&T is also willing to reach creative arrangements with airlines to ensure the airlines’ brands remain prominent, or to co-brand in some fashion. “So think of this as, we’re selling this to an airline so that the airline would have the ability to provide a premier service for their entire passenger base on the plane, so it’s not just about AT&T. We could white-label it for them [airlines]. But one advantage of having AT&T’s brand is it’s strong too, so I think there is an opportunity for airlines who are interested to have co-branded opportunities, recognizing their brand needs to be first because it’s their passengers, but I think AT&T brings a lot of strength to that story,” says Coffey.
Providing special offers to AT&T customers remains a possibility. “I think that what we need to look at is working with each airline customer and what their desire is for the experience they want for their passengers and building it that way. So there might be special things for certain passengers that they have, but there is also the unique opportunities for us to bring in for AT&T passengers as well. That would need to be negotiated with the airlines.”
Though Coffey declined to discuss anything about AT&T’s spectrum request – the company wants the FCC to revise rules governing Wireless Communications Services (WCS) so it can use already owned spectrum to support its launch of inflight connectivity – the AT&T executive stressed what the firm has global designs. While AT&T will offer an ATG-only solution over the continental US in the near-term, it will also come out with a “hybrid” ATG-satellite offering (it’s partner, Honeywell, is already providing all the terminal units for Inmarsat’s Global Xpress Ka-band connectivity service, which has been making headway in both the commercial and business aviation space).
Additionally, AT&T previously announced it is in the process of buying DirecTV. If and when a deal is finalized, AT&T would immediately have a relationship with JetBlue and United, which offer DirecTV over seat-back screens. Though AT&T’ could not talk about what’s happening on the DirecTV front, the company confirmed that from a product portfolio perspective it is “absolutely” looking at premium services “that would include either IP-based or streaming television on aircraft. And broader than live TV; other entertainment options.”
AT&T does not have any interest in developing a seat-back IFE system itself, though it would be happy to support DirecTV on United and JetBlue. Rather, it sees BYOD as the future of inflight entertainment. Even so, this type of positioning would pit AT&T against the fiercest competitor in the inflight entertainment and connectivity space, Panasonic Avionics, which holds a 70-plus percent market share of the embedded IFE market (its share is actually rumored to be even higher than 70%). Panasonic has also fitted some 500 aircraft with its Ku-band connectivity system, including aircraft operated by United Airlines. A further 1,500 aircraft in the world fleet are earmarked for equipage with Panasonic Ku. And the company has teamed with Boeing to deliver a phased array antenna to narrowbody operators, and certain regional widebody fleets.
Panasonic brushes off the suggestion that AT&T could pose a serious threat. “Obviously as an organization, they [AT&T] are a very big brand in the United States. However, I personally have a lot of history with them and I don’t understand why they suddenly want to be an aviation player again,” says Panasonic Avionics VP, Global Communications Services David Bruner.
“AT&T had a previous foray into this business with their aviation communications division. They realized it was more about airplanes than telecommunications, and they lost a lot of money and then spent a lot of money shutting down the business. In my experience, this is not a business for the timid. And it isn’t clear to me how they’re going to make money…I don’t know that outside of the United States, that the brand has any value whatsoever.”
Furthermore, Bruner says “it’s a big leap” for AT&T to go from a position of finding “some secondary use” for frequency it already owns (in the WCS) to building “a business in inflight entertainment”.
Yet it’s a leap that AT&T now seems all too willing to take.
[Editor’s note: This article was filed in-flight via a Gogo Wi-Fi session.]