Aug 26, 2008 (01:08 PM EDT)
Aircell Signs Up Fourth Airline For Wi-Fi Service

Read the Original Article at InformationWeek

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Aircell, the company that provides the new Gogo Internet service on some American Airlines flights, will soon announce that another airline has signed on for its service, CEO Jack Blumenstein said in an interview Monday.

American has installed Gogo on 15 airplanes for flights between New York and Los Angeles, Miami, and San Francisco, and Delta Air Lines says it'll have Gogo available across its domestic fleet of 330 commercial jets within a year. Delta is expected to expand that service to Northwest Airlines flights if the merger of those two companies goes through as planned, Blumenstein said, and Virgin America also is outfitting flights with Gogo.

Yet there's another airline that has just signed with Gogo, Blumenstein said, and the companies plan to make the announcement within days. All told, the CEO expects there will be some 2,000 commercial airplanes offering Gogo by the end of next year, adding that "we're very confident about that number." If Blumenstein is correct, Aircell will emerge as the dominant player in in-flight Internet services.

But what is Aircell, and where did it come from? The company is privately owned and backed by venture capital; Blumenstein did hint that it's open to considering a public offering of stock at some point. But you can't call it a startup: Aircell began providing analog-based voice communications on private business aircraft in the early 1990s, by partnering with cellular providers that primarily served rural areas. In the late '90s it shifted to satellite-based systems to support voice communications on overseas flights. (Unlike commercial jets, the FCC allows cell phone use on private aircraft.)

In 2006, Verizon began to get out of its failing Airfone business, since commercial airline passengers never warmed up to the idea of spending $20 to make a brief call from seat-back phones. That freed up a 4-MHz slice of publicly owned spectrum, which the FCC decided to put up for auction. "It was great spectrum that had been set aside only for aviation use," Blumenstein said. The FCC split the spectrum into two licenses: one for broadband use at 3 MHz, and another for a narrower use at 1 MHz.

Then Aircell got lucky. Verizon was expected to bid on the 3-MHz spectrum, but suddenly and unexpectedly bowed out, citing other corporate priorities. Aircell -- called AC BidCo LLC at the time -- got the spectrum at what Blumenstein considered a bargain: $31 million. Had Verizon been serious, it could have easily bid to a price level that would have been out of reach for Aircell. JetBlue Airlines' LiveTV subsidiary won the 1-MHz spectrum license with a bid of $7 million.

Aircell spent the next year building out its cellular network across the United States, setting up 92 cell towers. Blumenstein said each tower covers 350 square miles, including 350 miles extending out across the ocean on all three sides of the United States, and the company plans to double the size of the network next year to support growing usage.