AirCell to offer Internet on airplanes

LOUISVILLE – AirCell is hoping its recent $31.3 million investment will pay off big time for the commercial airline industry and consumers.

In June the 15-year-old Louisville telecommunications company was the high bidder in the Federal Communications Commission’s spectrum auction for air-to-ground broadband frequencies.

Now that the bidding is over, the company is completing the paperwork and payments required and should have its license by the end of month, said Aircell spokesman Tom Myers. “We’re hoping that within a year of the actual license issue we’ll be able to go live.”

“Going live” means fliers on both commercial aircraft and private jets will be able to conduct many of the Wi-Fi activities they enjoy on land – like accessing e-mail and cruising the Internet – on a high-speed connection while airborne.

“It’s like a hot spot on an airplane,” Myers said.

Voice over Internet protocol won’t be offered just yet, he said. “There are enough social issues surrounding the use of voice on an airplane that Wi-Fi will come first.” Many of the consumer surveys point to data as being more important on a plane than voice, he added.

Much of the funding for the auction came from the company’s new investor, New York-based Ripplewood Holdings.

In a post-auction restructuring to be formally completed in the coming months, AirCell will add Ron LeMay as chairman of the board. LeMay is a partner at Ripplewood Holdings, and he is the former president and chief operating officer of Sprint Corp. and chief executive officer of Sprint PCS.

It also will recognize additional investments of undisclosed amounts by entities affiliated with Blumenstein/Thorne Information Investors, a current AirCell shareholder.

The other auction winner was San Francisco-based JetBlue Airways Corp., which placed a $7.02 million bid through LiveTV LLC, its entertainment subsidiary, for a narrowband portion of the spectrum. JetBlue could use its license to provide in-flight Internet, telephone or other entertainment services.

Verizon, which currently offers voice service through Airfone on many commercial airlines, dropped out early in the auction.

Today, 99 percent of AirCell’s business is telecommunications systems for private jets. “If you buy a new business jet you can get an AirCell phone in your airplane,” Myers said.

But unlike the new broadband spectrum that will provide air-to-ground connectivity, AirCell’s voice-only phones use the Iridium satellite system. According to Myers, AirCell will continue that lucrative business line.

Air-to-ground broadband is much less expensive than using satellites, Myers said. “The airplane talks with wireless towers on the ground. It makes the equipment required on the airplane a lot lighter and simpler, and all that translates into a lower cost for the airline to install it and a lower cost for the user to use it.”

Dale Hatfield, a self-described “road warrior” who uses Connexion by Boeing, a satellite-based in-flight Internet service available on about a dozen airlines, said he is “reasonably optimistic” about the AirCell venture.

“If their system works the way it should work, and it uses potentially this less expensive technology, I’m in their prime base,´ said Hatfield, former chief of the office of engineering and technology at the FCC who’s currently an adjunct professor at the University of Colorado’s Interdisciplinary Telecommunications program.

Hatfield is concerned that AirCell is limiting its service to Wi-Fi when other wireless broadband technologies, like EVDO (evolution-data optimized) and the much-touted but not yet available WiMAX (worldwide interoperability for microwave access) are out there as well.

Hatfield would hope AirCell can interface with these other technologies both technically and conveniently.
“The good news, however,” he said, is that “Wi-Fi is in so many laptops and PDAs that’s a pretty good start.”

A lot of details for AirCell’s new broadband service need to be worked out, including pricing and service models.

“If you think about what you would pay for those types of services on the ground and knowing there’s many ways to pay for it – at Starbucks you pay by the hour or the day, and there’s monthly plans. If you think about what you pay for those things and pay a premium for doing that at 500 miles per hour at 35,000 feet, that’s at least a range of pricing,” Myers said.

Service could be offered through a wireless partner that already has a pricing model, he said.

AirCell’s wireless broadband in the air will be available in North America only, said AirCell President and Chief Executive Jack Blumenstein. “It’s possible that in the future our type of technology may be reproducible in another country or continent, but that’s down the road a bit.”

But, he added, even flights to Europe spend a lot of time in North American airspace. “On a Chicago to London flight, the amount of time you’re in the U.S. and before you leave Canadian airspace, it’s more than half the flight.”

The privately held company, which doesn’t disclosed financial figures, is expanding, Myers said. It recently increased its Louisville office space to 18,000 square feet from 10,000 square feet and opened an office in Chicago.

It also expects to double its work force from 50 to 100 between the two locations, he said.

Contact Caron Schwartz Ellis at 303-440-4950 or csellis@bcbr.com

AirCell Inc.

1172 Century Drive, Suite 280, Louisville, CO 80027
303-379-0200
Web site: www.aircell.com
Jack Blumenstein, president and chief executive
Employees: 50
Primary service: Wireless products for airline industry
Founded: 1991

Auctions speed up licensing process

Since 1994, the Federal Communications Commission has conducted auctions of licenses for electromagnetic spectrum.

These auctions are open to any eligible company or individual that submits an application and upfront payment.
FCC auctions are conducted electronically and are accessible over the Internet.

The auction system came about when Congress gave the commission authority to use competitive bidding. Prior to this legislation, the commission mainly relied upon comparative hearings and lotteries.

The auction approach is intended to award the licenses to those who will use them most effectively. Additionally, by using auctions, the commission has reduced the average time from initial application to license grant to less than one year.

Revenues from the auctions, estimated in the hundreds of billions since their inception, are deposited in the U.S. Treasury.

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