February 6, 2003 5:05 PM PST

Boeing's sky-high Net access takes off

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Connect to the Internet or read the duty-free gift catalog? Aircraft manufacturer Boeing is gearing up to answer that question for business travelers.

Connexion by Boeing, the company's wireless technology subsidiary, is in the midst of introducing its in-flight Internet service, which could lead to billions of dollars in additional annual revenue for the Bethesda, Md.-based manufacturer. Lufthansa German Airlines began trials earlier this year on a Frankfurt-U.S. flight. British Airways will begin to offer the service starting Feb. 18 on a London-New York (JFK) flight. Japan Airlines and Scandinavian Airlines System will begin service in 2004.

Eventually, Boeing hopes to retrofit 4,000 airplanes with servers, access points and antennas for in-flight Internet access, said Scott Carson, president of Connexion. In the future, planes will emerge from the factory with the necessary Internet-access equipment installed.

"We expect to sign one or more U.S. carriers by the end of the year," he said.

One hundred fifty planes will likely be retrofitted this year for Internet service, he added, while 800 more are expected to come online in 2004. Concurrently, Intel and others will begin to build and promote Wi-Fi connection areas in airports. Wi-Fi, also known as 802.11b, is a technology that allows the creation of wireless networks with a radius of around 300 feet.

To date, companies have struggled to make money off of providing wireless Internet service, but Boeing enjoys an advantage competitors haven't had: a captive, antsy audience.

And boredom, Boeing executives believe, can pay. Each international-bound plane flies approximately 700 flights a year, Carson estimated. Early marketing tests show that roughly 20 percent of passengers on large planes, or 60 to 80 people, will sign up for the service, which will cost $25 to $35 per transcontinental flight. Approximately 100 people, or nearly 30 percent of total passengers, are trying out the service on Lufthansa in the early trials.

Multiplying these numbers, prospective revenue will come to $5 billion to $8 billion annually, depending on the variables plugged into the equation. Connexion will share service with participating airlines.

Internet service for flights within the United States will cost less, said Carson, but planes on domestic routes can complete five or more flights a day.

The company will also charge airlines fees for installing the system.

Still, the flying Internet does currently have some kinks. This story was written on Connexion's plane to demonstrate in-flight Internet connections with a notebook containing a 1.6GHz Banias chip from Intel. The plane circled the San Francisco airport for close to 30 minutes before a connection with the satellite could be established. Once connected, downloads occurred at sub-56K speeds. This reporter's personal Hotmail account refused to open. (But to be fair, others on the flight had far better luck and could download pages faster.)

"The good news is that we got a connection," said Andrew Weisheit, vice president of direct sales for Connexion. "Otherwise we'd be in a cone."

Making a connection
Service is established through a combination of wired, wireless and satellite technologies. Depending on the plane, passengers can plug into a standard phone jack or connect via 802.11b. Either way, the connections feed directly to an in-plane bank of servers, which authenticate users and ensure payment has been made. Many planes also will come with electrical plugs so laptops won't have to run on batteries.

For now, connecting through a jack likely will be more common. National air traffic authorities have to approve specific Wi-Fi products for in-flight use. Wireless users on Lufthansa's flights, for instance, have to use loaners from the airlines. Regulatory approval, however, will likely accelerate, Weisheit said.

The in-flight servers then connect to satellites orbiting the equator. Connexion specially designed the antenna the airplanes use to connect, Weisheit said, and the company is working on a more high-powered version with Mitsubishi.

"It is mechanically like the same technology that links terrestrial ATM machines," he said. "The difference for us is that our ATM machines are moving at 600 miles an hour."

Connections to the satellite on the current system fade out north of Iceland, he said. The coming antennas will allow planes to maintain reception for planes on polar routes above Greenland.

Weisheit and others also stated that the system is robust enough to not require in-flight information technology managers.

The company is part of Boeing's overall effort, kicked off in 1996, to broaden its revenue base, according to company executives. Boeing formed Connexion in November 2000. Originally, it was targeted at providing service in the United States. American Airlines, Delta Air Lines and United Airlines were investors.

The decline in air traffic after Sept. 11, 2001, however, forced these companies to drop their equity positions in Connexion, Weisheit said.

 

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