A battle is brewing in the world of inflight connectivity pricing and lines are becoming more and better defined. On one side are proponents of the flat-rate model, charging based on time or flight. On the other are the consumption pricing players, with packages of bytes as their product. And passengers are stuck in between, trying to figure out what’s best.
The most recent salvo in this battle was fired by Inmarsat Aviation’s Leo Mondale during a presentation at the APEX Expo. Mondale touched on many topics, including product pricing, and he is now decidedly against the consumption pricing model, even though that’s how his company’s L-band aero service has been traditionally priced in the commercial airline space:
There’s been some talk about the megabit/second model and megabytes. I’ve heard statements that ‘Everybody sells mobile data by the megabyte,’ and that actually isn’t true. The way mobile data is sold in most of the world is in very large gigabyte/month allowances. It is a very different thing to count against a large gigabyte allowance than it is to count megabytes. …That is not the way customers expect to buy data. They expect to pay once and get enough to what they’re going to do in the period they’re paying.
Inmarsat is rolling out a hybrid terrestrial air-to-ground/S-band satellite solution in Europe. Lufthansa is slated to trial the service on its short-haul fleet in 2017. Though the carrier hasn’t announced its pricing model, Mondale’s comments would suggest that he favors providing unfettered access for a flat rate.
On the other side of the argument is, among others, Panasonic Avionics’ David Bruner, a proponent of the megabyte pricing model. For Bruner, it is a question of providing a “fair” service to passengers, where each pays for what they consume and also gets the product they are willing to pay for. At Expo, he noted:
The real key is, what is the transaction being provided to the consumer? Is it by the minute? Is it by some denomination of time or is it in some denomination of data consumption? What we’ve done is, we’ve migrated from time to data consumption because the consumption varied radically from one consumer to another consumer on how fast they were consuming data. This now leads to a more fair transaction with all customers.
Panasonic lays claim to a 51% market share of the satellite-based connectivity market; it counts Lufthansa’s longhaul operation as a customer, though the German carrier still offers flat rate pricing (even as Panasonic predicts that 80% of its customers will move to a MB packaged model).
Certainly most consumers would prefer to not overpay for a product but it is also hard to reconcile the pricing for service delivery in some scenarios.
Bruner acknowledged that buying bigger blocks of data should yield better per-byte pricing for passengers but at this juncture his company’s pricing seems to be coming in at roughly EUR 18.90 for at 120MB of data.
There are other costs to providing the service on an aircraft and a “buy in” price to activate the service is not unreasonable vis-a-vis covering those costs.
Bruner also hinted that it may be possible to buy a larger package of megabytes in the future, spanning multiple carriers and flights. That could bring the Panasonic offering much closer to what Mondale suggests passengers “expect” and to a more palatable price point for the frequent traveler. Biting at both their heels is the free wifi model adopted by JetBlue, which is seeking to differentiate itself from the pack.