Gogo: North American market will be awash in Ku-band in 2020
PARIS — In-flight connectivity provider Gogo Inc. on Sept. 29 presented a relentlessly optimistic view of its future, saying per-aircraft revenue will double within five years and competitors’ catch-up attempts — including Viasat’s monster Ka-band satellites and Inmarsat’s air-to-ground service in Europe — are minor drive-by attractions.
Satellite capacity bottlenecks in crowded airspace over big airports? Not an issue, Gogo said. By 2020 there will be an excess of Ku-band capacity over North America to serve 2,800 commercial aircraft in the air at a given time, each with 100 passengers on line.
Ka-band’s potential advantage in available bandwidth compared to Gogo’s Ku-band network? Gogo said the backup capacity available in Ku-band will be a multiple of what’s available in Ka-band, offering a resiliency that airlines will demand, and that Ka-band cannot offer.
Gogo thinks satellite, not ATG, is Europe’s future
As for London-based Inmarsat’s Global Xpress service of Ka-band satellites, buttressed by Inmarsat’s European Aviation Network providing air-to-ground (ATG) connectivity in Europe’s crowded airspace, Gogo Chief Executive Michael Small dismissed it as a threat.
“We see rapid adoption of satellite going on in Europe,” he said during Gogo’s annual investor day. “The opportunity for ATG is less.”
Chicago-based Gogo is spending $50 million to upgrade its own ATG network in North America, using both licensed and unlicensed spectrum to keep up with the company’s 2Ku satellite-based connectivity service, which promises more than 100 megabits per second to each aircraft.
Carlsbad, California-based ViaSat is building two Ka-band satellites, each designed to provide 1 Terabit per second of throughput, for the American and European markets.
Gogo has said 100 Mbps per aircraft is sufficient, and that investing in much more capacity will result in diminishing returns.
Speaking privately because it expects to be active in the in-flight-connectivity market, one satellite fleet operator agreed, saying on-board caching and other technologies to be introduced will guarantee passengers a terrestrial-connectivity-comparable service, with margin, at 100 Mbps per aircraft.
HTS satellites to push 2Ku to 100+ Mbps per aircraft
Gogo’s 2Ku service offers about 50 Mbps currently using wide-beam satellites. An upgraded modem, using the same space infrastructure, is expected to increase that speed to 70 Mbps next year.
After that, the introduction of high-throughput Ku-band satellites, notably by fleet operators Intelsat and SES, should increase throughput to 100 Mbps or more by late 2017.
Gogo did not address how sensitive this schedule was to launch delays, notably the grounding of the SpaceX Falcon 9 vehicle following a Sept. 1 explosion while preparing a ground test-firing.
Gogo Chief Technology Officer Anand Chari said Gogo’s satellite capacity estimates do not include possible future use of constellations of satellites in low Earth orbit. He said 2Ku would require modifications to work with these systems but that, in general, “2Ku will work with LEOs.”
Gogo has booked contracts to install 2Ku on some 1,300 commercial aircraft. It announced its latest order, for at least 124 long-haul aircraft for Air France/KLM, on Sept. 29. The first installations are expected to occur by late 2017.
Small said the cost of satellite bandwidth continues to drop, allowing Gogo to have delivered 57 percent more bits to its customers in the past year than the previous year, with a revenue increase of just 23 percent suggesting the added value given to passengers and airlines.
He said Gogo’s costs have dropped by two-thirds in the same period, in part because the company is paying less per quantum of satellite capacity.
Per-aircraft revenue to double to $300,000 by 2021
But while there is not a one-to-one correlation between bandwidth delivery and revenue, Gogo nonetheless expects revenue to grow with each new 2Ku-equipped aircraft in service.
Chief Financial Officer Norm Smagley said the the company expected average annual revenue per aircraft, now around $140,000, to double by 2021 as 2Ku is deployed widely both in North America and around the world.
In Gogo’s view, ultimately every commercial airline passenger will be connected during flight, in one way or another, compared to an average 6 percent of passengers today using Gogo’s service in North America.
The $300,000 in revenue per aircraft per year is mainly for passenger connectivity, Smagley said. Connected-aircraft applications such as engine and avionics monitoring would come later and would be an additional revenue source that ultimately may be even larger, he said.
Small said that the industry, which now counts perhaps a half-dozen players, ultimately will consolidate into a few survivors as the large-fleet airlines are placed under contract.
Gogo, he said, is counting on organic growth only and has no need to make acquisitions.