In the world of inflight entertainment and connectivity, the industry has seen what could be considered a serious content play (Global Eagle Entertainment’s string of CSP-related acquisitions), a hardware/integration play (by LiveTV and later its acquirer Thales) and a capacity/service play courtesy of satellite operator ViaSat. The latter firm, whose regional Ka-band Exede service is powering true high-speed Internet on JetBlue, United’s Boeing narrowbodies and now some Virgin America A320s admits as much, and is of course gearing up for a much-needed coverage play with the ultimate launch of a near global constellation. This will help ViaSat better address the needs of a connectivity market that is poised to catapult from hundreds of millions of dollars to billions within the next several years.
The ViaSat-1 satellite, gen 1 technology supporting the aforementioned US carriers today, “was a capacity play; nobody believed you could cram that much into a space platform. ViaSat-2 is a coverage play so you don’t have to have that trade-off between the coverage and capacity, as it will have twice the capacity and seven times the coverage; and ViaSat-3 will be more towards visible earth type coverage,” says ViaSat director Don Buchman. In contrast, the Ku inflight connectivity camp – Panasonic Avionics, Gogo and Global Eagle – first pursued a coverage play, opting for the near global availability of broadbeam Ku satellites. The launch of Ku High Throughput Satellites (HTS) – starting with Intelsat 29e in January – promise to offer a step change in bandwidth delivery.
But because it went big and bold on a US regional scale first, ViaSat is currently on fire from a #PaxEx perspective. Exede can support on-demand streaming media service partnerships for airlines (Amazon Prime on JetBlue; Netflix on Virgin America), and is generating buzz in the press and talkability among tech-savvy travelers. Which, from an industry perspective, begs the question – where does this leave Thales, which is technically lead on both the United and JetBlue contracts?
Some years ago, late-to-the-connectivity-party JetBlue had a choice of service, and chose ViaSat Exede. But the carrier brought in its seatback television subsidiary LiveTV to be the integrator on the project and contribute what ViaSat was clearly lacking at the time (and still lacks to a point, pending completion of certification work on various aircraft types). Industry observers have long wondered if JetBlue made the strategic decision to appoint LiveTV as firm lead on the contract pre-sale (and they’ve long suggested that Global Eagle made an 11th hour bid on LiveTV, driving the price up by $100 million). Whatever the case, many stakeholders saw $400 million as a stunning price for Thales to pay considering that connectivity on JetBlue and indeed United is supported by Exede and the fact that ViaSat had made known its desire to go direct as inflight ISP (as it is now doing for Virgin America).
Setting a clear industry standard by offering free streaming-class Internet on board, JetBlue doesn’t generally mention either partner when boasting about its Fly-Fi-branded product in press releases. ViaSat and Thales toot their own horns in the press and on social media.
During in-depth conversations with RGN contributors at the APEX Expo in October, Thales gave no indication it is suffering any sort of identity crisis; the company, like Panasonic, can leverage its embedded IFE position (linefit offerable on most aircraft types) to garner new connectivity business, be it fueled by Exede or Inmarsat Global Xpress, for which it is a value added reseller (VAR). And Thales’ GX solution is offerable on the Airbus A350, though it is certainly facing competition from fellow GX VAR Zodiac on many fronts including on the widebody. Thales is particularly proud of the JetBlue Fly-Fi rollout (service isn’t being dialed back to ensure consistency with other connectivity systems). “They [JetBlue] have the ability to have the best business model because they did it right. Because everyone can stream video, you can get someone like Amazon Prime to be your partner and offset your cost,” noted Thales Inflyt Experience CEO Dominique Giannoni.
But the French multinational company is still reliant on aero service from satellite operators – ViaSat and Inmarsat – which have opted to compete with it and others by selling direct to the market (versus, say, Ku providers, whose satellite partners have generally not gone this route yet).
Would Thales favor a near global high-capacity Ka offering over GX if such an offering existed? In short, would one trump the other?
“I mean you got to look at the fact that the market is moving now and you have got a certain set of technologies and choices to make now … you have got to make those trade-offs. You know, obviously, you have access to regional Ka and can offer a JetBlue experience that’s the lowest cost, highest value, consistent streaming solution that you can have if your aircraft flies in that region. If it flies outside that region you don’t want to have half your flights dark, so you might have to pick a different technology, Ku or a Global Express, to cover a broader area. So I think right now it’s a trade-off because … there is no global [high-capacity] Ka solution available today,” Thales management told RGN.
For a company that is both partner and competitor to ViaSat, Thales often expresses a very similar view of the market as ViaSat. “The going rate is $1.2 to $1.5 million to lease a Ku transponder, and then you have to put up the infrastructure, gateways, have a teleport, and have a network operation. It’s $1.5 to $2 million to operationally run a full Ku transponder for a year. [ViaSat’s Ku bizjet service] Yonder is that cost. Right now you could probably do 40 to 50 megabits per second peak, and how many people will be sharing that,” says ViaSat’s Buchman. Indeed, Ku connectivity is “an economic challenge rather than a technology challenge”, notes Thales management. “The technologies are on board and if you buy enough power on Ku you can create a similar experience [to regional Ka], the economics are not the same because the economics are the underlying infrastructure.”
Gogo is going to make the most of broadbeam Ku with its nextgen 2Ku connectivity solution (it touts capability of 70 Mbps over broadbeam Ku – though it says a production level service is closer to 25 Mbps – and eventually 100 Mbps over Ku HTS). The Chicago-based firm believes that the launch of Ku HTS – with a more affordable price point for service – coupled with 2Ku efficiency will ultimately bring the numbers in proximity to the cost of ATG connectivity today, giving it the one-two punch of both capacity (with spot beam coverage) and solid economics. In addition to Gogo’s 737-500 testbed, the 2Ku system is installed on Aeromexico (with certification already secured on the 737-800) as well as on a Virgin Atlantic A340.
— Jason Rabinowitz (@AirlineFlyer) October 22, 2015
Meanwhile, Inmarsat’s decision to develop a hybrid terrestrial service in Europe with Deutsche Telekom must surely be an annoyance to both Thales and ViaSat, which are eager to crack the European market, but all parties are publicly rather diplomatic about the topic.
More broadly, Buchman notes that Europe is still being built out by the two firms. “El Al should launch in first quarter 2016, [and we’re] getting more control of that. Thales has Vueling ready to go with a few aircraft; it’s all ready to go [Aer lingus has been shelved for now as previously reported by RGN],” he says. However, Vueling parent IAG’s recent acknowledgment that it is is eyeing Inmarsat’s hybrid ATG offering for 300 short-haul aircraft calls into question whether high-capacity Ka will be offered across Vueling’s fleet.
The whole European market “seems to be stuck or paused”, and hasn’t opened up in the way the US has,” says Buchman, noting that European legacy carriers are obviously being hit by Gulf competition and LCCs. “But I watch Amazon and Netflix expansions around the world … Our message to airlines hasn’t really changed much; we’ve got our talking points down. Two years ago, we said, capacity matters, but with Netflix [streaming] launching on North American flights … that’s the example of what capacity means is do it on scale. People know what we’re doing. When you add big brands like Netflix and they essentially put their stamp of approval [on it] – Netflix sees the future as quality wifi wherever you are – it really is a good match for us, and shows what we can do and what we believe in.
“I just try to compare my roadmap to what everyone else is saying, and I say ‘who’s shoes would I rather be in?’ I’d rather be in our shoes. It’s really a question of efficiency of capital investment. How efficient is your capital investment, and how efficient is it in returning that value to the shareholders?’ And we’re making an investment in capacity. So it’s not about getting more money out of current customers; current customers want more and [have a] willingness to pay. I talk to airlines – am lucky to be the third guy in – and ask ‘why isn’t Ku the dominant at-home experience for Internet on the ground? It’s residential; why isn’t Ku winning over Ka on the ground? If it’s good enough for passengers on the plane, why isn’t it competitive?’ It’s not. Ka is dominant [in residential]…”
ViaSat’s next high-capacity satellite, ViaSat-2, is expected to launch this year aboard a SpaceX Falcon Heavy rocket, and will cover the high-trafficked North Atlantic. The three-satellite constellation dubbed ViaSat-3, which will provide near global coverage and make ViaSat a more serious contender internationally, will become the focus thereafter.