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Inflight broadband a $130bn market by 2035

September 27, 2017

Inflight broadband has the potential to create a $130 billion (EUR110.7bn) global market within the next 20 years, resulting in $30 billion of additional revenue for airlines by 2035. This is the conclusion the research study, Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry, carried out by London School of Economics and Political Science (LSE) in association with Inmarsat, a global provider of global, mobile satellite communications.

Market potential

Based on current IATA data and industry sources, Sky High Economics has developed an independent forecasting model. It predicts broadband enabled ancillary revenues for airlines will come from four main revenue streams:

  • Broadband access charges – providing connectivity to passengers inflight
  • E-commerce and destination shopping – making purchases on-board aircraft with expanded product ranges and real-time offers
  • Advertising – pay-per-click, impressions, sponsorship deals with advertisers
  • Premium content – providing live content, on demand video and bundled W-IFEC access

At present, only some 53 out of an estimated 5,000 airlines worldwide offer inflight broadband connectivity. On the back of strong passenger demand, inflight internet will be ubiquitous on commercial aircraft by 2035. Currently, airlines receive an additional $17 per passenger from ‘traditional’ ancillary services such as duty free purchases and inflight retail, food and drink sales. Broadband enabled connected ancillary revenues will add an extra $4 by 2035.

Drivers for growth

Full service carriers look set to claim the lion’s share of airline revenues (63%), generating $19 billion by 2035. Capitalising on longer flight times, additional revenue will come from the ability to maximise e-commerce platforms and striking deals with content providers to offer premium packages. The Sky High Economics study predicts low cost carriers will generate $11 billion by 2035, the bulk of which will come from selling connectivity to passengers.

Regional differences

The research also identified that regionally, the greatest opportunity for broadband-enabled ancillary services is in Asia Pacific. Driven by passenger growth and availability of services, airlines in Asia Pacific will benefit from $10.3 billion of ancillary revenues by 2035, followed by Europe ($8.2 billion) and North America ($7.6 billion). Dr Alexander Grous (B. Ec, MBA, M.Com, MA, PhD.), Department of Media and Communications, LSE and author of Sky High Economics said: “The opportunity available to airlines is enormous.

The Sky High Economics study predicts the creation of a $130 billion market within the next two decades. Globally, if airlines can provide a reliable broadband connection, it will be the catalyst for rolling out more creative advertising, content and e-commerce packages. We will see innovative deals struck, partnerships formed and business models fundamentally changed for new players to lay claim to the $100 billion opportunity away from airlines.

Broadband-enabled ancillary revenue has the potential to shape a whole new market and it’s something airlines need to be planning for right now.”

Rupert Pearce, Chief Executive Officer, Inmarsat, said: “Inflight connectivity is no longer a luxury for passengers, it’s an expectation. The analysis from LSE shows there is huge scope for airlines to unlock entirely new revenue streams, while also helping to improve the passenger experience. What’s more, airlines will become the gatekeepers to a $130 billion market.

If they can install a high quality inflight broadband connection, we will see them open the doors to some of the world’s largest organisations.”

Elon Musk’s plan to girdle Earth with satellites hits turbulence

Elon Musk's Plan To Girdle Earth With Satellites Hits Turbulence

Selling broadband from orbit is a key part of how SpaceX plans to make money beyond its original rocket-launching service. Photo: Reuters San Francisco/Washington: Elon Musk’s ambitious plan to surround the Earth with thousands of internet-beaming satellites is encountering turbulence from regulators concerned about interference with competing systems. SpaceX, the rocket startup Musk runs, filed for permission for its constellation of refrigerator-sized satellites late last year. Selling broadband from orbit is a key part of how SpaceX plans to make money beyond its original rocket-launching service. But the US Federal Communications Commission is poised to deal the project a setback with a decision that could force power reductions on SpaceX satellites, and potentially limit the spectrum they can use, making them less effective. The regulator will in part defer to the International Telecommunication Union, an agency of the United Nations, on how these new satellite systems need to coordinate and share spectrum, according to a draft set of rules set for a vote on Tuesday.

The package is likely to pass as it’s backed by FCC chairman Ajit Pai, who leads the agency’s Republican majority. The FCC said it’s establishing rules in response to proposals for a new generation of communications satellites, which will be arrayed in constellations of hundreds or thousands of orbiting devices. Proposals have come from companies including closely held SpaceX and Boeing Co., which envisions a fleet of 2,956 satellites. OneWeb, a company that counts Qualcomm Corp. and Virgin Group Ltd. among its investors, requested permission to access the US market with thousands of satellites authorized by the UK. The ITU works on a first-come, first-served basis, so operators that already secured spectrum for their constellations have priority when satellites inevitably line up with each other in space and their beams cross, threatening to cause interference. This means SpaceX will have to coordinate with rivals such as OneWeb and Telesat, which are closely held. When the FCC proposed the ITU role in early September, it was described as a “major defeat” for SpaceX by satellite industry consultant Tim Farrar, who has advised several rivals of the startup.

OneWeb, also backed by SoftBank Group Corp., has priority in one band of spectrum outside the US, while Telesat has priority in another band in some parts of the world. This means SpaceX will have to restrict the power of its satellites’ signals in some cases, and possibly limit the frequencies it uses, making “it very difficult for SpaceX to provide an economically viable service outside the US,” Farrar said. SpaceX spokeswoman Eva Behrend declined to comment. Still, under ITU rules, satellite systems with spectrum priority can’t just block or ignore the other networks and must work out technical and operationally feasible solutions, according to a person familiar with the organization. Priority doesn’t mean exclusivity and it’s not a permanent designation, the person added. The person asked not to be identified interpreting how the rules apply to specific companies. There will likely be some good news from the FCC for SpaceX’s project, too. It’s expected to ease requirements for how quickly satellite constellations must get their services up and running, giving companies six years to deploy half their satellites and another three years to complete their constellation. Previously the agency required all the satellites to be deployed within six years.

SpaceX had asked for a waiver so it could deploy 1,600 of its satellites initially, and later launch 2,825 satellites after the six-year deadline, according to FCC filings. SpaceX argued that it could start its broadband internet service without all of its constellation launched. Launching hundreds of satellites should be enough to show its not hoarding spectrum, the company said.

“Completing the full constellation over a six-year period would require a launch cadence of more than 60 satellites per month, beginning on the day the Commission grants a license,” SpaceX wrote in one filing. “This is an aggressive pace even for a company like SpaceX, which has demonstrated considerable launch capabilities.” The FCC developed the rules so owners of valuable spectrum don’t hoard it and never use it for services. SpaceX and the FCC have clashed over the risk of the company’s planned constellation. Using a Nasa software program, SpaceX estimated in 2016 that its system had at most a 1-in-18,200 chance of injuring humans on Earth if satellites re-enter the atmosphere without burning up. That was better than Nasa’s 1-in-10,000 requirement. In March, Jose Albuquerque, chief of the FCC’s satellite division, wrote back to SpaceX saying that, in aggregate, the casualty risk was actually 1-in-5 for the whole constellation of 4,425 satellites. SpaceX in a filing said buildings will provide some protection, reducing the casualty risk.

The company also said it’s working to make its satellites more likely to burn up when they re-enter the atmosphere. Bloomberg

First Published: Tue, Sep 26 2017.

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