Getting business by not rushing to grab business it is an unusual strategy. Since this approach will give ViaSat a chance to watch developments (and plan its ultimate play), it’s crazy enough to work.
ViaSat thinks free in-flight Wi-Fi is not only realistic but vital to the passenger experience, and the company which powers JetBlue’s popular Fly-Fi connection, wants to deliver its lightning-fast connections without charging passengers a penny.
Speaking to Skift, Donald Buchman, Director of ViaSat, says it’s all about having the right connections: “For IFC [in-flight Connectivity], whatever company has the most capacity wins. Even on the ground, the coverage model is a density model. You cover areas of high activity with high bandwidth.” Buchman points to the powerful over 145 Gbps of ViaSat’s Sat-1, with a second Satellite to be deployed. As Buchman says: “It’s this level of capacity that people want. We see an increasing demand for more data use.”
New entries into the in-flight connectivity market, and the question of whether so much activity in this sector is sustainable, do nothing to shake Buchman’s confidence in the long-term success of free in-flight connectivity. “The ultimate goal is not to charge passengers for connectivity at all,” Buchman states.
To make “free” sustainable, Buchman looks to radical solutions to the issue of monetization, from the top down, with connectivity providers finding ways to make a free service viable to airlines. “A new business model needs to evolve,” Buchman says, “showing what’s possible. We’re watching as new business models emerge.”
Buchman suggests earnings can come from the various services connectivity facilitates—without those earnings necessarily coming from consumers. With a large consumer audience, he suggests, there are possibilities for alternate revenue streams from entertainment content. With consumers taking the lead of what content they choose to watch on-demand, content providers could ultimately be eager to get their product to audiences; resulting in a licensing disruption where providers pay to be added to a distribution network. An evolution of branded content could also produce revenue.
This is one of the possibilities and opportunities Buchman identifies. The primary focus, he tells Skift, should be on gathering the audience and reducing the carrying charges—making any costs of getting onboard appealing to advertising/content providers. “The objective is getting the costs down of that capacity, the cost of the equipment. In the long-term, that’s the #1 cost of capacity.”
Buchman recognises the in-flight Connectivity market is getting crowded. When asked about the AT&T/Honeywell Hybrid Air-to-Ground/Satellite service, Buchman says: “AT&T is a serious contender. I don’t know their intentions, but it’s a serious threat.” Buchman believes the threat lies in the number of contracts AT&T already has with mobile users, giving the company a starting advantage of customer numbers alone, but he believes this advantage is limited. “AT&T/Honeywell won’t bring capacity that’s significant with 4G. It looks like the same thing happening in the air as on the ground: a saturated duopoly, but there are new opportunities. A disruption of the current market is likely, but passengers will want the best connectivity—that’s about capacity,” he tells Skift.
Buchman explains that ViaSat also looks at the market differently. “We don’t define marketshare the same way as our competitors. We look at the number of customers. We look at the number of passengers on every flight using the service. We don’t count aircraft tails, but seats. That is where the market share will change.” He also welcomes a little competition. “We’re open to anyone entering the market to enhance the product offering.”
ViaSat is comfortable waiting to see just how the business models develop, and, in the interim, is not terribly concerned if a few contracts pass them by. “We may miss a few cycles of bidding in the commercial aviation sector as we’re launching our satellites, but we’re staying where the power is. We’re not just about commercial aviation. We’ve got a strong base in general aviation, military applications, navigation, maritime.”
“We’ve got a long-term vision and strategy,” Buchman tells Skift. “We’re not looking for a quick 2014–2015 return on investment. It’s more of a broad-scope 20–30 year plan. We just need to hold strong in the market as it plays out. We’ve got good co-conspirators to work with to keep the plan strong for the duration.”
Co-conspiracy includes making good alliances, as with ViaSat’s recent agreement with Eutelsat with their combined Ka-band networks providing high-speed global coverage, and spans as far as having competitors cover ViaSat’s gaps to launch. Boeing has announced that it will sell Inmarsat-5 Ka-band satellite communications to the US Government, as it works with ViaSat to provide a higher-capacity integrated satellite service.
“The government continues to have an unmet demand for military satellite communications, and we believe that commercially available space assets can play a vital role in helping to meet this demand,” said Jim Mitchell, vice president of Boeing Commercial Satellite Services (BCSS) in this announcement.
It’s hardly unusual for commercial aviation to reap the benefits of its defense arm—and that would extend to connectivity. This includes opening up security benefits to aviation too, through aircraft tracking and nose-to-tail connectivity including aircraft health reports. “By adding capacity, you remove the constraints on how you can use the data connection. OEMs have many ideas which you couldn’t do until you have greater capacity,” Buchman says. Though ViaSat is not the sole satellite provider to diversify its business beyond commercial aviation, those 140 Gbps make it an attractive option for many prime high-revenue applications of connectivity not involving commercial aircraft.
As Buchman rightly points out, once the capacity is available, it won’t go to waste. ViaSat’s customers in other market sectors keep the company’s revenue streams secure until the commercial aviation market is better defined, and ViaSat can play its strengths—which include close ties with the largest players in entertainment content.
If ViaSat’s long-term play results in free in-flight connectivity for passengers, without being burdensome to airlines, then everybody wins from their unique approach. Time will tell, and Buchman struck us as a very patient man.
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Tags: amenities, in-flight, viasat
Photo credit: People use their smart devices on an American Airlines airplane. Carlo Allegri / Reuters