Commercial passenger connectivity "is here to stay". And while L-Band aeronautical services are "clearly in the lead", Ku-band broadband "is setting blistering pace for units and revenues".
So says Northern Sky Research in its latest satellite market report, which estimates that the global MSS aeronautical segment (covering commercial, general, and military aircraft) will generate over $2.6 billion in total retail revenues from 2010 to 2020.
Well, cha-bloody-ching. It's clear SOMEBODY is making money from in-flight connectivity (sat boys, for one).
However, we are all aware that connectivity is still a cost centre for numerous parties, including airlines, though it is increasingly becoming the cost of doing business for major carriers. Hell, no-one has "ever" made money in this business, I'm told by multiple parties all the time, including, ironically (or truthfully?), one firm that has its fingers in the business of connectivity.
I wonder if we'll be able to make the same sweeping generalization in a few years, however. Perhaps it would be better to be a company that sells connectivity hardware rather than a service provider with revenue dependent on usage levels to cover the cost of the service. And, if connectivity is going to be a business for hardware sellers/IFE providers, then it would seem that the likes of EMS, Panasonic, Thales, Qest, TECOM, Rockwell Collins and others are sitting pretty, as airlines all over the world look to bring connectivity systems aboard their aircraft.
But what about the connectivity service providers - the Gogos, Row 44s, OnAirs of this world?
Last year Gogo said it was increasingly confident that an initial public offering (IPO) of shares was in its future. And it's not hard to imagine Row 44 working towards a similar goal (though I still wonder if Southwest Airlines might ultimately step in as acquirer). Equally, it isn't out of the question that Gogo and Row 44 might be looking for buyers.
While OnAir has won A LOT of business with airlines (underline, underline), it has not yet broken into the US market like rival Panasonic has just done with the United-Continental deal.
Might OnAir consider some form of merger or acquisition to gain a foothold in the US? Oh, don't mind me. You know I love a little intrigue and speculation. But I'll never forget walking in on a consultation between Row 44 and former OnAir chief Benoit Debains at the Aircraft Interiors Expo in Hamburg a couple years back. DeBains later admitted that the Airbus/SITA joint venture was open to partnerships with Ku providers, such as Row 44. Of course, that was before Imarsat announced its plan to offer a superfast Ka-band connectivity service from 2014.
Meanwhile, it seems that Row 44's prediction to me at APEX that some 200 Southwest 737s will be fitted with the connectivity system by year-end was a little on the rosy side. Southwest tells me that 105 737-700s are fitted with the system - less than one fifth of its fleet - and it estimates the figure "will be well over 100" by year-end. Southwest still maintains that its entire fleet will be equipped by early 2013.
Asked about the seemingly slow pace of installs, Southwest said: "We have a number of maintenance schedules to keep up with and Wi-Fi is just one of them. It's more the schedule of maintenance than a specific Row 44 issue."
And who is covering the cost of installs? Southwest says it doesn't divulge details of it's agreement with Row 44. But you can be sure that SOMEBODY is paying for the hardware, which means SOMEBODY is making money from connectivity. Sorry, I don't mean to yell. :-)