June 23, 2006 2:53 PM PDT

Verizon to exit in-flight phone business

Verizon Airfone will exit the in-flight phone business by the end of the year, a company spokesman confirmed Friday.

Airfone's parent company, Verizon Communications, plans to focus its efforts more on its core business, said Jim Pilcher, a spokesman for Verizon Airfone.

Verizon, the second-largest phone company in the U.S., is in the midst of a multibillion-dollar upgrade to its network to compete better with cable. Verizon's new Fios network extends fiber-optic cable directly to homes. Using these new fiber connections, Verizon plans to offer high-speed Internet access, phone service and television.

Verizon acquired Airfone back in 2000 from GTE. The air-to-ground phone system, which first began about 21 years ago, is installed in about 1,000 planes operated by Continental Airlines, Delta Air Lines, United Airlines and US Airways. Pilcher said the company will work with the airlines to figure out how to remove the phones and other equipment from the planes.

Due to its high price tag, the Airfone service has never been popular. The service costs 69 cents per minute for Verizon Wireless customers, or 10 cents a minute for a $10 fee per month. But for people who are not Verizon Wireless subscribers, the prices are much higher. For domestic calls it costs $3.99 to connect the call and $4.99 for each additional minute. International calls require a connection fee of $5.99 and $5.99 for each minute of calling.

Verizon Airfone had been a favorite to win the Federal Communications Commission's auction of 800MHz spectrum, but it dropped out of the bidding early.

A company called AirCell ended up winning a license to use the spectrum currently being used by Airfone. Earlier this month, AirCell said it plans to use its radio spectrum license to offer "affordable" wireless broadband service based on Wi-Fi standards aboard commercial airplanes.

Verizon's license would have expired in 2010, but because of the auction, the company would have had to relinquish its part of the spectrum within two years of when AirCell receives its own license.

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