Boeing Bearish On The Future Of Inflight Wifi
In what will prove to be the stupidest move ever, Boeing announced that it will end the Connexion service that provides airborne Internet service on Boeing aircraft:
[from Boeing to End Its Service for Using Internet Aloft by Thomas Crampton]Boeing announced on Thursday that it planned to scrap its in-flight Internet service, saying there was not enough demand.
That might upset the people who use it. According to the German airline Lufthansa, which has offered the service more extensively than any other carrier, passengers like the option of staying connected while flying.
[...]
The service is much like that in a Web cafe, with passengers gaining access to the Internet through a high-speed wireless network. The system, which is also used by executive jets as well as oil rigs and vessels at sea, bounces the Internet connection off a series of satellites.
Boeing published a survey of 3,200 airline passengers in April that seemed to indicate that the airborne Internet would soar in popularity. The survey found that 83 percent said Internet availability would have an impact on their future travel plans and choice of airline. Of those who actually used the service, called Connexion, 92 percent said they would recommend it.
The problem, it seems, is that enthusiasm for the idea far exceeded the number of people who actually paid for the service.
In announcing the project in 2000, Boeing predicted that the market for in-flight Internet access would be worth $70 billion over 10 years. But the company said Thursday that the number of passengers using the service on the 156 aircraft with 12 airlines amounted to little more than “low single digits” a flight. Boeing declined to say how much it cost to run the service.
The cost to airline passengers is $9.95 an hour or $26.95 for an entire flight and revenue is shared between Boeing and the airlines.
Maybe the problem is that Boeing can't roll it out fast enough. I, for one, have never been on a flight where I was offered access, and I travel several times per month. Or maybe it ineveitable that such a service needs to be rolled out independently of aircraft manufacturer. Is it only available on Boeing aircraft? Isn't this an obvious market area for T-Mobile or other cell/Wifi companies?
Boeing may be too stupid to figure out the economies of scale necessary for airborne Wifi. $9.95 per hour is too much if you are on a two hour flight. Many people will say, I'll wait. It's the international flights where $26.95 starts to look sensible. Whoever moves into this space will have to get the price down to $2.95 an hour, or sell unlimited accounts for the serious traveler. Airbus plans to move ahead with their alternative.
Remember this famous quote?
There is no reason for any individual to have a computer in their home. - Ken Olsen, founder and CEO of Digital Equipment Corp
This one is right up there:
Over the last six years, we have invested substantial time, resources and technology in Connexion by Boeing. Regrettably, the market for this service has not materialized as had been expected. We believe this decision best balances the long-term interests of all parties with a stake in Connexion by Boeing. - Boeing chief executive Jim McNerney
So, I guess they overestimated the near-term returns, but instead of regrouping and playing for the long haul, they are going to drop out. Dumb.
Comments