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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.
The company is looking into available spectrum in other "large land mass" areas, including China and India. Aircell also is looking at satellite technology to support commercial travel overseas (you can't erect cell towers in the middle of the ocean), but Blumenstein said it's currently too expensive. That's not good news for Gogo users hoping for in-flight Internet access between the United States and Europe. However, Blumenstein predicts a premium-priced satellite service may emerge, available from his company or another, designed for overseas travelers within the next few years.
Gogo is proving it can perform well, delivering up content with no delays, with more than 30 passengers simultaneously using it on some flights, Blumenstein said. Aircell uses technology developed by Meru Networks to provide each passenger with a discrete Wi-Fi stream. Aircell's cellular network uses compression technology to allow speedier transmission of data between the plane and the ground.
As part of the Gogo service, Aircell installs an 800-GB server on each plane -- soon to be upgraded to a 1+ TB server -- that caches content from recently accessed Internet addresses. Since the server doesn't have to keep calling on the network to retrieve Web content already in its cache, passengers get the content all that much faster. You also can expect the airlines to offer content to passengers, such as movies and television shows that reside on the plane's server, Blumenstein said.
Aircell "watches for bandwidth hogs, both applications and individuals," through its network-monitoring service. And there will be consequences for pigging out at the bandwidth trough.
"We don't know what you're doing, or how much of what you're doing, but if you're doing a lot more than what you should for fair distribution on the aircraft, we'll put you at the back of the line," Blumenstein said. That means those using too much bandwidth may see their service slow, while responsible Internet citizens shouldn't have a problem.
Airlines are able to get up and running with Aircell's Gogo for as little as $100,000, sometimes less, Blumenstein said. He added that airlines have many opportunities to recoup the costs beyond charging the $12.95 Internet service to interested passengers. That includes improved operations via the Aircell technology platform that can support Web-based cockpit applications for maintenance, crew scheduling, and weather information.