A year is a long time in the aviation industry, and even Nostradamus wouldn’t be brave enough to claim what the future holds in our sector over the next five years and beyond. With ongoing digital transformation initiatives driving innovation and passenger expectations pushing what’s possible in the sky — and with increasing pressure to find new ways to monetize the journey —the only real certainty is change.
For airlines, this puts increasing pressure on them to make partner decisions that serve today’s needs but, more importantly, the needs and realities of tomorrow. We know that passengers increasingly want their flying experiences to mirror their home and office experiences. Being 35,000 feet in the air is no longer an acceptable excuse to interrupt their entertainment, work, shopping, and other communication activities. The big question for airlines will therefore focus on how to future-proof their Wi-Fi capacity in light of expanding demand.
Are airlines making short-term decisions about Wi-Fi coverage when the real strategic consideration in the medium to long-term is capacity?
In this third episode of our Digital Transformation Podcast series for commercial aviation, Chris Phillips — head of corporate communications and PR at Viasat and Don Buchman, vice president and general manager of Viasat’s commercial aviation business — tackle the burning question: Are all in-flight connectivity providers created equal? And what should airline executives take into consideration when making key partner decisions?
Some of the topics touched upon in this podcast include:
- Where demand is globally for in-flight connectivity (IFC)
- How Viasat is going to service areas around the globe with high-speed internet from Ka-band satellites
- “Good enough” IFC is no longer acceptable; passengers expect similar service to what they get on the ground.
- What’s more important to airlines — coverage or capacity?
- How competing with ISPs on the ground makes Viasat more competitive in the air
- Preparing airlines for the future with forward-compatible equipment today
Transcript: Viasat commercial aviation podcast No. 3
Chris Phillips: Hey everyone, it's Chris Phillips, head of corporate communications and PR at Viasat. I'm back with Don Buchman. Don is vice president and general manager of Viasat's commercial aviation business. So last time we talked about debunking myths in in-flight Wi-Fi -- great chat, lots of interest. Thanks. Today we're going to get the heart of what people ask us all the time. Are in-flight Wi-Fi providers all the same? You know we touched upon it the last time. A lot of questions coming back just about that part of the conversation. Obviously my answer is: We're not all created equal. But Don we want to hear from you. The Good The Bad The Ugly. So we're going to touch upon a bunch of stuff today. And I think we should just jump right into the questions.
Don Buchman: Let's just do it. I think I'm ready this time to start.
Chris Phillips: OK. So we're looking at the landscape of technology providers. Let's kick off with some tough ones. When it comes to choosing an in-flight connectivity partner, what are the deciding factors that are influencing airlines today?
Don Buchman: Yes I think a lot of it's been driven just by customers' demands. Right. But another big one is who's available by market. You might be somewhere in a market that's not the U.S. or it's Africa or it's Asia. And so one of the things is I can't buy services not available in my market. And so that's always a big one. But then it's also what's available in my market and what's coming to our market. So that's what we see a lot of especially since as you know, the United States was probably the leader in getting connected aircraft out there and that's now starting to pick up in Europe – and you're seeing a pick up in other parts of the world. As that happens now, the U.S. is almost on their second tier of buying. Right, they bought 8-10 years ago. Now they're actually getting into their second buy, while the rest of the world is pretty much getting into their first buy.
Chris Phillips: So it does seem like Europe is a pretty active market right now.
Don Buchman: Yes. So you know we've just ourselves had two, three launch customers come up, SAS and Finn(air) just recently. El Al's been flying and now they've got their 787 flying and we're hoping to bring Icelandair online later this year. And it's become a big thing. The European traveler, now that they're getting a taste of it is actually seeing a lot of the benefits.
Chris Phillips: So when do you think the Asia-Pacific market will start to heat up?
Don Buchman: You know it's going to heat up with a lot of demand there right. We get a lot of questions out of the Asia-Pacific market. They're just asking us OK, we'll buy your thing and it's like well OK can you wait? Because one of the things as you know for us Viasat has our own satellites and we're basically as we launch them that we're bringing on new capacity and new coverage areas with each one. And so right now you know in the Asia Pacific area we've got through partnership with NBN in Australia and we are able to bring the other great asset there that they built for there for the Australian people – the Australian flyer Qantas, and that's been fantastic and we're looking to do that in other markets.
Chris Phillips: So I was going to ask and wait for later in the program to ask some of these questions, but you are setting me up so ... you know there's an elephant in the room and Viasat's Ka service is not yet global. So first tell us what are Viasat's global plans with respect to commercial aviation. And then I want to talk about some of the airline perceptions and are they willing to wait.
Don Buchman: But yes Viasat’s global coverage today, we've got five satellites plus a partner satellite that we're offering service on. So think of the Americas we've got starting ... the northern tip of South America. Our Viasast-2 coverage goes from there all the way up through the Caribbean Sea, Mexico, United States, Canada, and it covers all the water tracks off the East Coast of the U.S. into Europe. And so that's with ViaSa-2. ViaSat-1, WildBlue-1 and Anik F-2, we've got all that coverage. And that hooks up with our joint venture satellite Ka-Sat in Europe and that basically gives us cover all the way into the Middle East. So someone might ask how you get El Al, it all goes right up to Tel Aviv in the Middle East and that gives us pan-European coverage and into the Nordic countries. So that's today's coverage area and that's what's been fantastic about the partnership with NBN I mentioned, gives us the continent of Australia. And so that's the extent of our Ka coverage -- we're always looking to bring more on. Now our future plans for ViaSat, what we're bringing online is ViaSat-3. Right it's been the mythical beast as people dubbed it. It's not so mythical anymore since everyone is trying to copy it again. They're not quite catching up but it's there. So what ViaSat-3 is, it's a series of global satellites that'll give us -- 3 satellites -- give us global coverage. So the first two are going to be launching over the Americans. The first one, and then the second one will launch over EMEA, which is Europe, Middle East, Africa. Sort of think of those sort of two big markets starting into 2020-2021 timeframe getting into service. So we're really excited about those and what really is nice and differentiates those is bring a terabit per second of capacity to each. Just to remind everyone, we started off with ViaSa-1 with 140 gigabits. We got more on ViaSat 2 and now a terabyte per second. Our competition is talking about going from 5 to 20 to 40 gigabits per second, in the other the other technologies that are high throughput. And so that's fantastic. And our third satellite is Asia Pacific, which we're targeting to get in line to be online you know 2022 timeframe, 2023, and that timeframe so that will kind of go as our global coverage.
Chris Phillips: That's great. Are airlines willing to wait?
Don Buchman: You know I would say if you asked me that question a year ago would say no.
Chris Phillips: Okay. What's changed?
Don Buchman: What I've seen changed is what we brought to market. Basically airlines -- I'm not going to speak for them -- but I think what I'm seeing in the marketplace is they don't want to pick the wrong technology. I'd hate to be in a market, pick a technology and then two years later my biggest competitor in my home market waited and went with Viasat and basically brought what Viasat brings to marketplace, and they are embedded and capitalized with an inferior product and technology that they have to live with. And they're (asking) do I just have an inferior product for the next seven years where I recapitalize again faster than I expected to? I'd say in the past they thought Wi-Fi was a commodity so let's just get it on and make sure it works and it's on. But working is just not good enough right. It actually has to serve the needs for the purpose it was put on, which is delivering the natural demand. That's kind of what has changed for us I think. I think our success that we've had with a lot of our customers that we brought to market has really changed the perception that, you know what, maybe waiting two years isn't so bad when it's a 10-year decision, and I have to live with a bad decision.
Chris Phillips: We've seen success in the U.S. market with airlines that have waited.
Don Buchman: We have, yeah. JetBlue was pretty vocal about it right. They kind of surveyed the market when they kind of came out and they actually waited for ViaSat-1. I mean, hats off to them, they selected Viasat before we launched ViaSat-1.
Chris Phillips: So in the past two podcasts you've talked a lot of capacity and you know here we're talking about coverage. So let's talk coverage vs. capacity. Is there one that's winning out or are you hearing from airlines that they care more about one versus another, or because you just said that they're willing to wait, coverage really isn't as important as that capacity play.
Don Buchman: Yes. What we've seen is I mean a lot of airlines, it's really been about capacity right. So even JetBlue, I talk about them a lot, when they launched with our service, you have to remember only 70 percent of their available seat miles were covered within our coverages and now ViaSat-2 is going to give them nearly 100 percent coverage of their routes. So that was a customer who basically chose quality and capacity over coverage. Clearly. We've had others like Virgin America, when they launched. We'd had this Ku-Ka product right. So they wanted the best when they were flying United States right? It was very competitive transcontinental markets, but they also wanted, at the time, they didn't tell the marketplace, but they knew they put those aircraft on Hawaii. So what they didn't want to do is make the compromise just to get coverage over Hawaii they were going to pick an inferior product. So we came up with pretty innovative solution we're really excited about, it's been working great, where they can use this Ku-Ka antenna. So when they're doing the San Francisco to New York they get the great Viasat Ka capacity. And when they're going out to Hawaii from San Francisco or L.A., they're there not any more disadvantaged anyone else was. But their using Ku coverage. And we're seeing airlines a lot of interest in that product to basically go there, and as we add Ka coverage -- just like your cell phone has multiple bands -- you used to have 3G and then LTE you know you wouldn't buy a 3G only phone. And then just say well LTE is not everywhere, so I'm going to buy a 3G phone. You know you use LTE when you can and you fell back to 3G, and that's a lot of our customers saw that with that. So that's a choice right. And then some customers are just you know kind of willing to wait depending on the situation, but coverages is something is really important -- we hear from the marketplace 'I've got to be on all my routes because passengers need the service wherever they go not just when they go a certain direction.'
Chris Phillips: So I want to bring us back to what the podcast is really all about which is we're not all created equal, right? And so from an apples to apples perspective, can you share how Viasat is different and why we're not all created equal?
Don Buchman: Boy, I've talked about that a lot haven't I? It's the thought process around what are you delivering? What's the purpose? You know is the purpose an antenna? Is the purpose something else, right? Is it a portal? No the purpose is delivering what is being demanded right. And you're not going to satisfy your customers if you don't. So that's what we think. That's how we think. And what we've done is we've brought that to our satellites right. That's the core of ... OK, you boil all that down to how do I get the most capacity at the lowest possible cost, because that allows me to expand and serve as many people as I can, as we can. And we did that, that innovation goes up into the satellites and we don't stop because the internet's not stopping, people's growth not stopping. Nothing is stopping. So we continue to innovate and that's what separates us, as I think our thought process. And what we're trying to achieve.
Chris Phillips: I know I've heard you say on media interviews that we don't compete with the traditional in-flight Wi-Fi provider. We compete with a 50 dollar cable bill. You have a whole different set of competitors to think about. Can you walk us through that thinking?
Don Buchman: For us, that's how we're thinking about it all. It's really hard. We're competing in the terrestrial market with our residential business against fixed wireless, cable, DSL and they're putting price points out there. You mentioned the 50 dollars -- you've gotta deliver a great service for 50 dollars, that's become the norm, and we're competing against that. So how do we do that? It's how we innovate all the way through, how do we vertically integrate, collapse all the technology into the lowest cost package, have the lowest friction for acquisition cost. And so we were able to bring that same thinking and technology and competition into the airline market. So the airlines can benefit from that how we're doing that and that's really kept us on our toes. It's a really tough competition. We've been really successful as you watch Viasat grow and continue to grow. I think we're getting good we're doing better but it is continuing to grow and we're taking all that into the airlines and they're getting a net benefit of it.
Chris Phillips: So one last question for you: Taking the long term view here, are airlines comfortable making choices today that will directly influence and impact their ability to compete in the digital transformation over the next decade? I know you touched upon this a little bit before but really are they are they willing to make the choices.
Don Buchman: It's hard to say. Who knows what's going to happen in the next five to 10 years right. We all remember 20 years ago they put phones in the back seat backs. You know that was like OK, people want to be talking on phones. Actually they didn't. So it is a tough choice but as they see the way the world evolving, there's been a much more decentralized environment, internet, blockchain -- all these things kind of coming out. You have to be ready for it. One of the fabrics of that is connectivity. And so I think that's really bringing the airlines. I think they're getting so much smarter. They're basically learning and researching and just really understanding what is it going to take and getting expertise in that market just to understand it. And you know we think the more educated they are the better it is for Viasat, right, because they are going to make choices that revolve around what we're trying to get done.
Chris Phillips: So I hope that we addressed or at least touched upon how and why we're not all created equal. It definitely stands off in the technology that we're bringing to market, the amount of capacity. It sounds like the coverage piece we have an answer to and we're addressing pretty aggressively. So Don I won't keep you any longer. You're probably exhausted from my questions ....
Don Buchman: And we actually haven't even gone to the hard stuff -- all the stuff you know that's really important to the airlines -- the stuff that we don't talk about a lot but the airlines really get value out of like: our equipment's reliable, we service the aircraft we answer the calls. We're a good partner right. Those are things that are just table stakes but they're just as important and something Viasat is really committed to and it's showing in a marketplace as a good partner.
Chris Phillips: As always thank you for your time. Love the insights the laughs definitely can't wait to talk again.
Don Buchman: I love the walk-on music as well. This is great.
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