Report warns airlines and service providers that passengers will not pay large premium to use mobiles on aircraft

Many airlines will install equipment enabling passengers to use their mobile telephones in flight by next year, but such services will need to be used frequently to bring call charges closer to those on the ground, says a report by Booz Allen Hamilton.

The management and technology consultancy also warns that airlines and mobile telephone network operators will have to consolidate their offerings by forming alliances at an early stage to bring the technology to maturity and capitalise on the market’s revenue potential, estimated in Europe to be up to €2 billion ($2.39 billion) by 2010.

Uwe Lambrette, author of the report, says the high prices and different handsets used on previous in-flight telephony systems discouraged passengers, but new technologies will allow them to make calls on their own tele­phones at lower prices.

Mobile telephone use on flights could generate substantial revenue by attracting around 100 million users by the end of this decade, but questions remain over how revenue would be split between mobile-telephone operators, airlines, satellite operators and aircraft manufacturers, Lambrette says. He estimates that between 50% and 75% could go to mobile- telephone operators.

“By 2006, many airlines will permit and offer mobile telephony. To develop this lucrative market, airlines and mobile-phone operators will have to quickly build alliances and sustainable business models that can grow initial offers to maturity,” Lambrette says.

Airlines will be able to install base stations in their aircraft to bundle incoming and outgoing calls and forward them via satellite to a ground station. The base stations will enable handsets to send out lower powered signals that only need to travel a few metres, limiting interference with the aircraft’s electronic circuitry, which has previously prevented the use of mobile telephones on board. Without the new technology, there is potential interference with electronic systems when mobile telephones search for an available base station by emitting high-powered signals.

Although “there is room for a premium on terrestrial rates”, this must not be excessive and handsets must be comparable with those used on the ground, Lambrette says. The report predicts initial call prices of around 1 per minute, but says: “Mobile operators and airlines will only be able to sustain a high-margin pricing during the introductory phase.” It predicts that “expected strong market penetration of the services from 2008 will in the long run reduce the price per minute almost to the level of regular mobile telephony”, or between 50 and 75 euro cents per minute within three to five years.

Swedish mobile phone manufacturer Ericsson has announced that it will offer a modified GSM base station for on-board mobile voice telephony by the end of this year, allowing 60 passengers to use their mobile handsets simultaneously when the aircraft reaches cruising altitude as well as offering optional dual-band support.

Helen Massy-Beresford / London

Source: Flight International