Subject: [NEXTEL-1] In-flight Internet Retooled After Slump

From: [email-masked]
Date: Tue, 29 Jul 2003 12:53:03 -0400

In-flight Internet Retooled After Slump

Contributed by mmasnick on Tues, Jul 29 2003 at 1 : 26 am

A popular topic at Techdirt recently has been the sudden hype surrounding
"internet in the sky". The News Tribune has a good profile of Boeing's
Connexion offering that seems to be losing out on deals to its rival Tenzing
in the US domestic carrier market. The Connexion system seems superior
in every way, however - from the full internet access (Tenzing gives you very
limited internet access) to the flat rate fees. Connexion even says that the
pricing is designed to be customer friendly - unlike their rivals. What has
surprised me is that no US carrier, so far, has been willing to sign on with
Connexion, and has instead, gone with Tenzing. The reason they're going
with Tenzing is they're all looking for ways to save money - and Tenzing
doesn't charge them to set up the system. However, the Connexion system
is so much more useful than Tenzing's that it's not hard to imagine a plane
with Connexion getting much more revenue out of the system. Connexion
does say they're close to a deal with at least one US carrier, and suggests
that it's a "smaller, more technologically savvy" airline, rather than one of
the big guys. My guess would be JetBlue, which keeps saying they're going
to offer internet in the sky, but hasn't done much to offer it.

http://www.techdirt.com/news/wireless/

======================================================================================

In-flight Internet retooled after slump

JOHN GILLIE; The News Tribune

It seemed like such a good idea at
the time.

The time was April 2000. Boeing's
idea of marrying the newest, hottest
technology - the Internet - with a
mature but growing business that
Boeing knew well, commercial
aviation, promised strong growth
and profit potential.

The company dubbed its new
airborne Internet division Connexion.

The idea behind Connexion was to equip airliners and private jets with
sophisticated antennas and satellites to create real time Internet service for
passengers and crew members.

If only Boeing could have foreseen the future.

Less than two years after its formal beginning, Connexion by Boeing faced a crisis

that could have put a swift end to its ambitious plans and the infant enterprise
as
well.

Scott Carson, Connexion president, remembers well. After the Sept. 11, 2001,
terrorist attacks had devastated the airline industry and the economy had turned
sour, he had only a short time to prove Connexion's worth.

"I asked Phil (Boeing Chairman Phil Condit) to give us four more months. If we
hadn't generated a new order, then he could shut us down," said Carson.

In a company with fewer resources and less patience, Connexion might have been
abandoned on the spot, but Condit granted Carson's request.

Connexion's prospects brightened, and now, a little more than a year later, are
finally beginning to bloom.

But the enormous change in the airline industry has caused Boeing to overhaul its
business plan. It has refocused its sales efforts for the airborne Internet
service
from domestic airlines to foreign carriers.

Before the terrorist attacks, Carson said, Connexion envisioned the service
rolling
out first with major domestic carriers and then gradually spreading overseas.

"We were working with a group called the Kansas Group, United, American and
Delta. They were interested not only in equipping their own 1,500 aircraft, but
also
as equity participants in the business. They were great partners," Carson
recalled.

"We'd had a very conservative business plan leading to 9-11. We were going to
launch this business in the continental United States going through what was
called a small scale launch starting with about 75 aircraft from those three
airlines
and using that as an advanced beta test to grow the enterprise to the form that it

would ultimately be," he said.

The domestic launch was technologically simple, said Connexion spokesman
Sean Griffin, because it required only one satellite to provide air-to-ground
connections for the whole United States.

But the attacks and the subsequent dive in domestic airline traffic changed
Connexion's' plans. The Kansas partners pulled out.

"Subsequent to 9-11, when it was evident that the airlines were merely going to
have to focus on survival, we found ourselves launching a global business and
launching it back into the domestic market," said Carson.

"We found the business dramatically more complex, but it led to some fundamental
system architecture changes as we learned what it was like to fly the North
Atlantic
and the North Pacific," he said.

Those longer flights required multiple satellites with seamless handoffs of
connections.

And the numbers of aircraft involved are more modest. Lufthansa, for instance,
recently signed an agreement to equip all of its long-haul aircraft. Eighty-eight
planes are involved. SAS has agreed to put Connexion Internet service on 11
aircraft.

Connexion also is negotiating with British Airways and Japanese carriers.
Connexion has proposals out to 16 other airlines, many of which it hopes will
become customers.

Carson predicts the first domestic customer could sign on late this year. He won't

say which airlines are most interested, but he hints the first domestic customer
may be one of the smaller, more technologically savvy carriers, rather than one of

the huge majors that have struggled to meet their payrolls.

The new Connexion arrangement works this way:

Boeing installs antennas, a computer server and either a wired or wireless network

throughout the plane, usually during normal maintenance. Some airlines, hoping to
launch the service more quickly, are even taking some aircraft out of service for
the
Connexion installation. That installation takes about a week, depending on how the

system is installed.

Once the system is installed, the airline pays Connexion an initial setup fee.
Then
Boeing collects service fees from travelers for the service and splits those fees
with
the airline, according to a contract.

Pricing models are different, depending on the airline. Lufthansa plans to charge
about $30 a flight for Internet access for its long international flights.

Carson said Boeing believes one fixed price rather than pricing by the minute or
by
the quantity of data handled is the most customer-friendly way to sell the
service.
That pricing model means no surprises at the end of the trip when customers
discover they've stayed on-line longer than they'd anticipated or find out how
much
downloading large graphics had added to their bill.

And Connexion believes its method of providing connectivity is superior to that of
its
Seattle rival, Tenzing Communications, which is controlled by Airbus, Boeing's
plane manufacturing rival.

Tenzing's system caches frequently seen Web pages on a server and downloads
and uploads data in batches rather than continuously. But the Tenzing system is
significantly less expensive.

Tenzing recently signed an agreement with Verizon Airphone to provide e-mail
service on United Airlines' nearly 500 aircraft. United was one of the original
Kansas Group members.

The installation will cost bankrupt United nothing, and the service may cost
travelers less, but with significantly reduced capabilities, compared with
Connexion's system.

Boeing offers airlines either wired or wireless systems. Carson said the wireless
systems may become more popular, because they allow airlines to reconfigure
their cabins without extensive wiring changes.

Aircraft wired with Connexion also will have better communication between the
aircraft and ground operations and maintenance people.

Equipped planes also will transmit diagnostic information to ground maintenance
personnel while airborne, giving mechanics early warning of the parts and tools
they'll need to restore the plane to perfect operating order when it lands.

But will the demand for Internet connectivity prove popular enough that it will be

profitable for Boeing and the airlines that install it?

The once-ubiquitous airborne phones are now disappearing from airline seatbacks
because they proved unpopular.

Carson said the Internet's appeal is broader than phone communication.

"The thing is that when you get in an airplane, phones are not terribly private,
and
they're expensive, and they're even less reliable," he said.

"That's what took us down this path, a belief that if we could turn that time in
the
airplane into something of utility to the traveler, whether it's entertaining
themselves
or communicating, or just relaxing and surfing the Web," said the Connexion
president.

Carson thinks Connexion is past the roughest spot in the road. The operation has
even increased its staff, while other Boeing units have laid off thousands.

"Overall, it's been challenging. We're pleased with the state of the technology.
We're
pleased by the enthusiastic response we've gotten, and we believe it will
continue,"
he said.

John Gillie: 253-597-8663
[email-masked]

Scott E. Carson

Title: president, Connexion by Boeing

Age: 56

Home: Federal Way

Education: Washington State University, bachelor's degree in business
administration; master's in business administration, University of Washington

Career: Carson joined Boeing in 1973 as a financial analyst on the B-1 bomber
avionics program. He was named president of Connexion by Boeing in October
2000. During his Boeing career, Carson has served as executive vice president and
chief financial officer of Boeing Commercial Airplanes; executive vice president
of
business resources for Boeing Information, Space and Defense Systems;
controller of Boeing Information Systems Division, and finance manager for the
U.S.
Air Force E-4 program, among several other executive posts.

Community involvement: Trustee, WSU Foundation; advisory board for UW
Executive MBA program; board member for Childhaven

http://www.tribnet.com/business/story/3544477p-3575496c.html

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