AT&T recently announced that it will mobilize the skies with a new inflight Wi-Fi service sometime in the second half of 2015. Based on its announcement, the company wants to give traveling consumers more than email, slow web browsing and blocked Netflix and YouTube videos that they experience from today’s inflight Wi-Fi. Building on its 4G LTE network, AT&T plans a high-speed inflight broadband service for passengers as well as cockpit communications, maintenance operations, and crew services.
Despite the long-term commitment by airlines, the New York Times reports that only about 6% of flyers use onboard Wi-Fi. A survey by AT&T and aerospace partner Honeywell indicated that nine out of ten people who used inflight Wi-Fi were frustrated by slow speeds, explaining why so few pay $29.95 to connect.
On-board connectivity was first adopted by top executives and geeks willing to pay the premium to stay connected; top execs because they almost exclusively used speed-insensitive email, and geeks because they needed to be connected all the time and can function with command line interfaces and character-mode apps. Today it’s the road warriors who are willing to pay the premium because they can’t afford a missed customer appointment or delayed follow-up proposal by being offline. But executives, geeks, and road warriors still make up a small, exclusive group.
The inflight Wi-Fi in use today wasn’t designed for the always-on smartphone-toting consumers. It was designed for notebook users long before almost all consumers acquired smartphones. Now it’s not about worker and executive productivity, just about being connected.
It looks like AT&T is trying to capture a new and much larger category of consumers who want to be constantly connected with their mobile devices, compared to the professional group that has to be connected with their notebooks. This larger group wouldn’t pay $29.95 for slow internet access, but many more will pay less to stay connected on fast broadband.
Increasing the 6% of flyers that have to be connected to 50% is a big business opportunity for the airlines, too. According to the International Air Transport Association (IATA) 3.3 billion passenger flights will be made worldwide in 2014. For the airlines that will share in the Wi-Fi revenues, this is a big opportunity. On average, airlines only make a $5 per passenger profit.
AT&T is also in a position to offer to offer consumers even more options to purchase in addition to Wi-Fi because it can offer more than airlines currently offer for movies and TV shows. Through its U-verse cable television unit, AT&T has agreements with all the major television networks and many studios. There is a good chance that a much more diverse TV offering by AT&T would lead to more entertainment purchases.