With the launch of its second generation satellite network, and 3 million devices using its in-flight connectivity network every month, ViaSat is investing millions of dollars in research and development of its next generation network already in an effort to achieve a state of airplane internet nirvana in the next few years. Executives from the California-based satellite service and in-flight Wi-Fi hardware provider discussed what needs to occur to support growth in airline passenger internet usage during its first quarter fiscal year 2018 earnings call Wednesday.
According to ViaSat CEO Mark Dankberg, currently 3 million devices across 568 aircraft in service today are connecting to the ViaSat satellite network per month. ViaSat has a three-year backlog of around 840 planes for in-flight Wi-Fi installations under contract and plans to accelerate installations to 100 aircraft per quarter by 2018. Dankberg spoke about how ViaSat’s in-flight Wi-Fi service revenue is growing fast and a recent reason is gate-to-gate service allowing passengers to connect while on the ground. Gate-to-gate can be a good way for airlines to differentiate, especially on shorter flights, and on busy airports such as New York, Boston or Washington, where a long time is spent on the ground. Dankberg continued to say gate-to-gate performance is one of the key factors that make the ViaSat service the benchmark for speed and value.
But while gate-to-gate works extremely well on the ViaSat service, he said for the competition this could be the failure mode – as other service providers do not have enough bandwidth to support passengers near busy airports, causing these other Wi-Fi services to become slow. Dankberg states that this is the same failure mode that occurred for others with air-to-ground, where other providers raised prices to reduce demand in an attempt to improve performance. While that might have worked for those other service providers, it was not good for the passenger, and it hasn't been good for the airlines either.
ViaSat takes a completely different approach, which is rooted in having the most capacity to serve more airlines and more airline passengers. There is no doubt across the industry that ViaSat is bringing more satellite capacity online than any other broadband provider. With ViaSat-2 coming online in 2018, ViaSat will have with 300+ Gigabits per second (Gbps), followed shortly thereafter in the 2019/2020-timeframe by ViaSat-3, which will offer more than 3-terabits per second of total network capacity from its satellite trio.
While ViaSat is planning for future growth in bandwidth today, Dankberg called out his competition noting they simply do not have the capacity needed to serve major airlines at busy airports, which will be in the Gbps ranges. He states you can look on the websites of other satellite providers and see their spot beam maps – these other providers will be challenged, as the bandwidth needed is so high that they may not even be able to serve a single, major carrier if the passenger take rate gets much above single-digit percentages. Dankberg said a clear way to see this effect is for other providers to test in-flight Wi-Fi service at or near busy U.S. airports such as Atlanta, or the New York/Boston/Washington corridor, or in Europe, at Frankfurt or London. ViaSat believes the effect to be increasingly evident for its competitors, as the competitor services would likely suffer as the number of planes in service increase, which will cause the competition to raise prices or add other barriers to contain usage.
But ViaSat is taking the opposite approach. He states their strategy is pretty straightforward. “We believe in-flight Wi-Fi is one of the most cost effective ways to improve passenger satisfaction, but that will only work for passengers that actually use it.”
The Company’s goal is to help its airline partners deliver a greater customer satisfaction at lower costs, which while that includes having a lot of capacity – it must also go beyond just the connectivity pipe. The key is to offer a great Wi-Fi system, and show how airlines can take advantage of the power of the internet to engage more passengers. That means appealing to different passengers in different ways, including business use, social media, stored or live entertainment or en-route travel services. To the extent that passenger engagement can be monetized by the airlines, ViaSat believes it can achieve substantial competitive advantage.
Delta Air Lines, for example, whose hub airport is in Atlanta, has 1,100 aircraft equipped with in-flight Wi-Fi providing access to more than 400,000 customers per day, according to
The connected aircraft brochure featured on ViaSat’s website shows plans to progressively evolve from a 450 Gbps network capacity in 2017 to 2.5 by 2020, with another 1+ Tbps to follow with the third ViaSat-3 class satellite planned for the Asia-Pacific market.
Dankberg closed by saying, “Our airline customers, so far, have been the ones most interested in increasing passenger engagement. We're doing our best to make them successful in their markets, and we're also investing now in line-fit and in STCs to get on the most valuable planes and to scale to support substantial growth.”
Correction: The article has been updated to reflect ViaSat's belief that only service providers other than its own network have capacity issues.