Message: My Christmas Present to the board.
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Airlines, Service Providers Say They've Learned From Boeing's 'Connexion' In-Flight Net Woes
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Rivals Learn From Boeing's 'Connexion'
Sunday December 23, 2:26 pm ET
By Anick Jesdanun, AP Internet Writer
NEW YORK (AP) -- Airlines and service providers seeking to deliver high-speed Internet services to passengers say they've learned from Boeing Co.'s 2006 decision to pull the plug on its ambitions to outfit its planes with a similar service.
Analysts say Boeing's failed Connexion online service was costly to install and operate, resulting in large expenditures before getting a single paying customer. An industrywide downturn triggered by the 2001 terrorist attacks made the system an even tougher sell to struggling airlines.
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Among other things, JetBlue Airways Corp., AMR Corp.'s American Airlines and Virgin America are today turning to air-to-ground connections to avoid Boeing's expensive satellite fees.
"We wanted to attack every one of the things that were inhibitors in that first-generation system," said Jack Blumenstein, chief executive of Aircell LLC, which is providing service for American and Virgin.
JetBlue's LiveTV subsidiary paid the Federal Communications Commission $7 million for wireless spectrum that one test JetBlue aircraft has been using since Dec. 11 to communicate with about 100 cell towers spread across the continental United States.
The 1-megahertz frequency band allows that aircraft to offer free e-mail and instant-messaging services on laptops and handheld devices through Yahoo Inc. and BlackBerry maker Research In Motion Ltd.
Aircell licensed a band three times the size of LiveTV's for $31 million and plans to offer broader Internet services, including Web surfing, for about $10 a flight -- what Boeing had charged for the first hour. Pending regulatory approval, Aircell's first Internet-capable flight is expected on American in 2008, using 92 cell towers on the ground.
The air-to-ground approach has its limits, though. It's useless for many international flights because of long stretches over oceans. And it hasn't been approved outside North America.
That is why Alaska Air Group Inc.'s Alaska Airlines, which has over-the-ocean flights to Alaska and Hawaii, is going with a satellite-based system through Row 44 Inc. Row 44 is using an existing satellite network from Hughes Communications Inc. rather trying to assemble its own as Boeing had.
Panasonic Avionics Corp., a unit of Matsushita Electric Industrial Co., took a similar approach in developing a service for Australia's Qantas Airways Ltd. and other airlines.
"The service itself is about three times more bandwidth efficient than Connexion was," said David Bruner, Panasonic's executive director for corporate sales and marketing.
Think of it this way: Boeing leased satellite transponders from various providers whether it needed the capacity or not. Under its deal with Intelsat Ltd., Panasonic can buy capacity in smaller units until it needs more.
Technology also has improved such that airplanes using Row 44's or Panasonic's systems don't need to carry as much weight as Boeing required, saving fuel costs.
Panasonic plans to charge about $12 an hour or $22 per 24-hour period for its service, compared with Boeing's $10 for the first hour or $27 for the full day. Alaska hasn't set prices, and free service for frequent fliers was among its options.
OnAir, which recently started service on one Air France aircraft, is taking yet another approach in delivering in-flight services: It is using existing cellular phone systems, including their technical and billing infrastructure.
With an on-board GSM cell "tower" certified by European regulators, phones won't emit strong signals and potentially interfere with the aircraft's navigational equipment trying to connect with a tower on the ground.
Boeing had deals with major international carriers such as Germany's Lufthansa AG and Japan Airlines Corp., but large U.S. carriers -- several of which filed for bankruptcy in the aftermath of Sept. 11 -- balked at investing in extra services.
Boeing, which did not disclose how much it invested in the service, took a pretax accounting charge of $320 million in 2006.
Glenn Fleishman, editor of the Wi-Fi Networking News site, said Connexion's failure resulted from Boeing's specific approach and "doesn't reflect the viability of (in-flight services) from a financial or technical perspective."
He said the new approaches look promising, though they may run into their own issues with scalability or coverage.
Boeing spokesman John Dern said the aircraft maker had no plans to re-enter the business and was leaving such services to others.
"There are others out there with different business models, and I don't know anyone who's mounted a successful standalone business yet," Dern said. "No doubt there will be firms that try, and I'm sure somebody will figure out a way to do it."
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