When Gogo’s high-speed 2Ku system launched on Delta, pricing was set at an extremely enticing rate. No, it was not free as you might find on a few other airlines, but the $9.95 flat fee was a dramatic shift from the prior and often extremely high air-to-ground pricing which the public had become accustomed to. The $9.95 flat fee on Delta allowed unrestricted web browsing and media streaming, a breath of fresh air for frequent and leisure flyers alike.
On a recent Delta flight between New York and West Palm Beach, Florida, Gogo was spotted dramatically overhauling its 2Ku pricing structure. Not only is the $9.95 flat fee gone, but Gogo has decided to break out streaming capabilities into a higher rate plan. If passengers want to be able to stream video, they will have to pay a higher rate for the privilege.
The new pricing scheme, at least on this particular flight, offered a flight pass suitable “for light web browsing, email, and messaging” for $15, as well as a “stream flight pass” for $25, apparently unlocking streaming video. It is unclear if the lower tier plan outright blocks streaming video, or just offers a significantly lower bitrate.
— Two If By Air (@twoifbyair) July 29, 2017
The move to a more evolved pricing scheme for 2Ku is not unexpected, and was foreshadowed by CEO Michael Small during a 2015 earnings call. “[P]ricing per byte will clearly come down significantly when you bring more capacity. What happens per session or per passenger, we’ll have to see.” It seems we have seen. On Ku operated services, customer prices have increased slightly, rather than decreased.
On a Delta flight with regular Ku in April 2016, a 1-hour pass was offered for $5.95. On 2Ku a year later, the rate has increased by 5 cents to an even $6 for the 1-hour pass. Ku capacity pricing may have come down over recent years, but Gogo customer pricing has not significantly followed suit.
The increased pricing scheme flies in the face of Delta’s CEO Ed Bastian, who recently spoke with Cranky Flier about the future of Wi-Fi pricing at Delta. “At some point, we’re going to have to figure out how to get Gogo at the same price-point customers expect the value is, which is free,” said Bastian. “Maybe there will be a two-tier, free and a premium service.” While the premium service has materialized, the free tier has not.
Getting passengers to pay for in-flight Wi-Fi has proven tricky for airlines around the world. While 2Ku is certainly capable of streaming video to multiple passengers on board, the question of whether passengers are willing to pay remains. And of course Gogo is fighting an uphill battle to reclaim its reputation of offering slow and unreliable Wi-Fi.
Delta is now pushing notifications to passengers, informing them of 2Ku availability, which will at least help to increase awareness of the paid service.
When JetBlue first launched its ViaSat Ka-powered Wi-Fi, it offered two tiers. The base tier was free, while a streaming tier was priced at $9 per hour, $1 less than what Gogo is charging on 2Ku. JetBlue found that so few passengers opted for the paid plan that it eliminated it altogether and now only offers free access.
During the recent APEX Tech meeting in Los Angeles, long-time industry veteran Peter Lemme discussed the “difficult challenges for us in the connectivity world” of offering free connectivity “because there are costs involved and they have to be paid back”. He noted that “airlines talk about offering paid services today and wanting to go free in the future” but “actually I would be going free today and pay in the future because the trends are to, are going in the wrong direction”.
…even if you have a free product you are not going to get 100% of the passengers; maybe about 30% will try it, but if it’s a good product you can get past 30% and maybe a bit above 50%.
Delta has the advantage of currently offering substantially better inflight entertainment than the majority of JetBlue’s fleet, which may decrease the need for passengers to even attempt to stream video to their own devices over 2Ku. Any Delta aircraft with 2Ku installed offers free entertainment, mostly in the form of seatback screens (the carrier recently celebrated its 500th Panasonic IFE-equipped aircraft). If quality content is offered to passengers, streaming over 2Ku may even be unnecessary.
Gogo did not reply to your author’s request for comment. It is not yet clear if the aforementioned pricing scheme is a long- or short-term play.