Connexion by Boeing, Boeing Co.’s Irvine-based in-flight Internet arm, may shake up its game plan as it faces fresh competition from Verizon Communications Inc.
After spending tens of millions of dollars on a system using satellites to deliver Internet service to planes, Connexion now is considering offering airlines access via wireless towers on the ground.
The problem: No major U.S. airline customers for Connexion’s satellite service.
The service may be too costly or cumbersome for widespread U.S. adoption, according to some analysts. A system using existing wireless towers could be cheaper, they say.
Verizon, via its Verizon Airfone Inc., contends it can make in-flight Internet access a widespread reality with a lower price tag and gear that’s easier for airlines to adopt. The system uses Verizon’s vast network of wireless towers.
The Federal Communications Commission opened the door to a wireless tower system last month, announcing an auction for air space.
“Verizon is the dark horse here,” said Henry Harteveldt, a travel analyst with Forrester Research Inc. in Cambridge, Mass. “They’ve got the installed base. They’ve got the network on the ground. And they have, just like Boeing, airline relationships.”
Verizon Airfone operates phones in the seats of planes on several U.S. and international airlines.
Connexion has had to shift its thinking in the past year.
Boeing’s technology uses satellites to beam the Internet to planes. From there, passengers log on to a wireless fidelity connection, just as if they were sitting in a coffee shop or at the office.
“Boeing’s myopic behavior has changed,” Harteveldt said. “There is a tacit acknowledgement satellite technology is not necessarily practical for now.”
Connexion blames the lack of U.S. customers on a sick industry.
“Generally, that’s attributed to the economic condition of the vast majority of U.S. carriers,” spokesman Marc Birtel said. “Once they’re healthy again … we feel confident they will follow.”
The company still considers satellite the leader in in-flight Internet access. But Boeing is keeping an eye on its options as other technologies emerge, according to Birtel.
“Nothing has been decided,” he said.
With Verizon’s emerging threat, Boeing faces a couple of ways to respond, according to analysts.
It could press ahead with its satellite system. Or it could get into the wireless game and opt to bid on the auction.
Boeing would have to build its own tower network or, more likely, pay to access those of a wireless company.
A “partnership” is one avenue that is being contemplated, Birtel said.
Bill Pallone, president of Verizon Airfone, declined to comment on the speculation of a partnership.
Going Wireless
Boeing then could combine a land system with its satellites to give global travelers a near seamless ride. Someone traveling from John Wayne Airport to London via Chicago would get Web access the whole trip.
“I’m not surprised Boeing is considering putting in a bid,” Harteveldt said. “I’d be surprised if they didn’t. You have to be innovative. You have to be open to adapting your product to what the market demands.”
One critic contends satellite is a laggard without the flexibility of wireless systems.
“Satellite just isn’t going to keep up,” said Robert Syputa, an analyst with Montreal-based telecommunications consultancy Maravedis LLC.
Internet-based phone calls and other newer features require more than satellite can deliver, he said.
Boeing contends satellites can handle the offerings coming on board.
“The technology is evolving and we’re looking at new applications,” Birtel said.
At stake is the rich North American market for travelers who want to check e-mails, sports scores or watch online video.
“The market for Internet access is generally on a flight of three hours or more,” Harteveldt said. “That’s when you get a little antsy about staying in touch with the office.”
Other big wireless companies, such as AT & T; Inc.’s Cingular Wireless LLC, could bid on the auction as well.
Verizon’s Pallone said he’s been in discussions with U.S. airlines about his land-based products.
It could take a year to roll out after the FCC auctions off airspace, according to Verizon.
Until now, airlines have opted for Boeing’s satellite service for long flights across oceans.
Major Connexion customers include Germany’s Deutsche Lufthansa AG, Sweden’s SAS AB, Japan Airlines Corp. and Taiwan’s China Airlines Ltd.
The three original backers of Connexion were U.S airlines: AMR Corp.’s American Airlines, Delta Air Lines Inc. and United.
They backed out of the venture after the 2001 terrorist attacks.
“After Sept. 11, the whole business changed,” Birtel said. “The whole focus went away from the domestic carriers and went toward more international carriers.”
