It takes two to tango, but three to make a market

Author: Martyn Roetter
Published: 2017-10-20

The satellite and mobile industries are trying a more intimate relationship with the arrangement between Inmarsat and Deutsche Telekom (DT) for the European Aviation Network (EAN). This involves a much deeper partnership than wholesale deals in which satellite operators provide backhaul for terrestrial mobile networks. The EAN initiative is a more complex proposition than one where the two modes of wireless connectivity are primarily complementary, either geographically in providing access to end-users or as network components. But as satellite and mobile tango, their success depends on a third business party—the airlines.

The future of this initiative depends on the airlines’ business model of choice and on human behavior in commercial flights. In both respects, the signs are positive.

The EAN comprises an S-band satellite (Inmarsat’s assignment of 2×15 MHz at 2 GHz) with an LTE terrestrial network across Europe to allow airline passengers in the crowded European airspace to use their personal devices for internet browsing, video streaming, gaming and other broadband online services. This connectivity can also be used separately for aircraft operational communications. Combining satellite and terrestrial connectivity (with initially some 300 base stations on land) is suited to the European environment. It will cover 30 countries (the 28 members of the European Union plus Norway and Switzerland) and provide a transmission rate of up to 75 Mbps to an aircraft. International Airlines Group (IAG), the parent company of Aer Lingus, British Airways, Iberia and Vueling, will be the launch customers for EAN, scheduled to enter service by the end of 2017.

The prospects for EAN to become a win-win-win business are real, but dependent on how cost reduction and revenue opportunities are exploited. Airlines installing the requisite equipment, whether on new or retrofitted aircraft, consider whether this equipment will allow them to dispense with existing onboard entertainment systems for passengers, saving weight and costs. They also look at the benefits from operational communications capabilities that this equipment will support in addition to passenger connectivity.

On the revenue side airlines must decide whether to offer inflight broadband connectivity either bundled within the ticket price or as a source of incremental revenues. Potentially broadband connectivity may be included in the ticket prices paid by premium passengers, but charged separately in economy class and on low cost airlines.

A recent worldwide passenger survey found that the majority of passengers, whether on short haul or long haul flights, covering the gamut from business travelers to families with children, want to have broadband connectivity when flying, for reasons from work-related to keeping the children amused for the sake of peace and quiet. Currently, only 53 out of an estimated 5,000 airlines worldwide offer inflight broadband connectivity, which is expected to become ubiquitous by 2035. Ancillary revenues from broadband connectivity have been estimated to add an extra $4 per passenger by 2035 or about $30 billion based on a forecast of a near doubling of passenger numbers to 7.2 billion. So the business case seems promising.

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