In-flight connectivity. You think it’s a complicated business model in Europe and North America? Come to Asia. Credit: Arqiva.

TOKYO — Providers of in-flight connectivity (IFC) to commercial airlines say the challenges they face in North America and Europe are even more daunting in Asia, where resistance to paying for service is strong and the average airline size is small.

“We get asked: ‘The airline does not want to pay, the passenger does not want to pay. So what are you going to do to fix the business case?’” said Jags Burhm, senior vice president of satellite fleet operator Eutelsat, whose 172B satellite is scheduled to enter service after spending four months migrating to its final geostationary-orbit slot.

The same comment could be made anywhere else in the world where IFC service providers are deploying capacity and lining up airlines. But in Asia, with the notable exception of China, most airlines have relatively small fleets, depriving the service providers of scale economies. It just makes it harder.

It gets harder. “Take rates over Asia are relatively small,” said Patrick Carroll, regional vice president for IFC provider Gogo. “One of the biggest challenges: Who’s going to pay for the bandwidth? We speak of airlines paying for this out of ancillary revenue. But ancillary revenue is is 2-10% of the business. That’s not going to pay for the service.”

Can an airline justify $736 per day on a non-negotiated rate?

Here’s Burhm on a basic cost-benefit calculation for IFC:

“If you take an Airbus A320 and take a typical Ka-, Ku-band system, is about $4.80 per hour in fuel bills. Check with Airbus and Boeing, but that’s typically what it ends up being, although some airlines I talk to are spending less than that, on a per-hour basis, in terms of the actual rate impact. Flat panels or not flat panels: At the end of the day, that’s where it’s at.

‘And I always quote this magical number: $736 per day. That is what I believe it costs and if you can provide enough operational benefit, or sponsorship, or through the ticket — however you want to monetize it — for you to do it, you can make a decision to give internet for free. On a narrow-body aircraft that makes sense. On a wide-body it gets more complicated in terms of what you want to do with the IFE. It’s more about the airline’s DNA and strategic view.”

IFC providers slogging through Asia’s regulatory swamp, nation by nation, say this will necessarily be slower here. But they have to march through it given the region’s growth.

“Asia is probably our biggest market and growth fast,” said David Bruner of Panasonic Avionics, which has leased the HTS capacity of the Eutelsat 172B.

“We will outgrow the capacity on that satellite within about two years,” Bruner said, alluding to an impending capacity-lease deal to meet the expected demand beyond 172B. The danger here, he said, is that airlines begin to view IFC as a commodity and drive prices down as a consequence.

Bruner said that, for now, the IFC providers’ requirements over certain specific Asian and Pacific Ocean routes has meant companies like Panasonic have not been able to benefit from the excess capacity over land markets in Asia.

“Most of what’s here [in IFC-useful satellite bandwidth] is here is because one of us caused it to be here, by being an anchor tenant on the contracts,” Bruner said.

Bruner and Burhrm — whose company is negotiating a trans-Atlantic partnership with Ka-band provider ViaSat — agreed that there is no need to switch from Ku-band to Ka-band in the near-term.

“Two bits per hertz now for Ku-band,” Burhm said, makes Ku-band no less efficient than Ka-band, especially given the installed base of Ku-band satellites.

Laurent Philippe, vice president for Global Eagle Entertainment, said China appears to be moving to Ka-band for its planned domestic IFC service, making China an exception in the region.

Gogo’s Carroll said gate-to-gate connectivity in rain-heavy Asian markets will continue to argue for Ku-band. Even China will have to weigh whether having a single-point-failure Ka-band satellite will outweigh the advantages of Ku-band, where multiple satellite alternatives exist.

Over the poles: Small but necessary, thus NGSO appeal

Carroll and Bruner agreed that while most flights don’t traverse the poles, where geostationary-orbit satellites have coverage challenges, these routes are important for IFC providers signing service-level agreements that guarantee 99%-plus availability.

“LEO will fill a vacuum,” Carroll said of the proposed mega constellations of low-orbiting satellites.

Bruner, who has recently become a vocal believer in LEO constellations, said Panasonic Avionics believe “at least two or three of these” will actually be built. “And they are going to impact our market.”

He said OneWeb, with no inter satellite links to ferry communications from a satellite over the Pacific Ocean to a landing point, “is probably the most challenging” of the broadband LEO constellations. “But it’s not a huge issue if we can point an electronically steered array at two satellites. I will say it’s really hard to make a business case for a GEO satellite over the poles.”

Carroll said Gogo now offers 99% availability in its contracts with airlines. “That is quite high,” he said. “And many of our customers think it’s quite low, which means we do actually have to go up north, over the poles. The question is when will LEOs work in the business model.”

Bruner said offering IFC everywhere “is part of the customer experience we can offer.” With the HTS satellites on which Panasonic Avionics has leased capacity that are coming into service in the coming year, he said, the company will have some 9 GHz of capacity in service, 80% of which will be sourced on HTS satellites.

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Peter B. de Selding
Peter B. de Selding
Peter de Selding is a Co-Founder and editor for SpaceIntelReport.com. He started SpaceIntelReport in 2017 after 26 years as the Paris Bureau Chief for SpaceNews where he covered the commercial satellite, launch and the international space businesses. He is widely considered the preeminent reporter in the space industry and is a must read for space executives. Follow Peter @pbdes