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Summary:

Is it a case of don’t trust the early adopters? Boeing’s Connexion “broadband in the sky” service received rave reviews from most of the early adopters who wrote long paeans about the service, and how they could Skype and work in the sky. The mass market […]

Is it a case of don’t trust the early adopters? Boeing’s Connexion “broadband in the sky” service received rave reviews from most of the early adopters who wrote long paeans about the service, and how they could Skype and work in the sky.

The mass market thought otherwise. Boeing today decided to shut down the service and is taking a $320 million charge, as it writes down the assets and pays termination fees to the customers. All Nippon Airlines, Japan Airlines, SAS, Singapore Airlines and Lufthansa are three airlines with live Connexions. This should not come as a surprise, since the company has been shopping the service for a while. The decision is also bad news for Colubris Networks, one of the key equipment providers to Boeing.

“Over the last six years, we have invested substantial time, resources and technology in Connexion by Boeing,” said Boeing Chairman, President and CEO Jim McNerney. “Regrettably, the market for this service has not materialized as had been expected. We believe this decision best balances the long-term interests of all parties with a stake in Connexion by Boeing.”

One of the biggest problems Boeing faced was lack of traction in the key US market, where many routinely travel with laptops and want to stay connected. The service, which received internet signals from Satellites and distributed them via WiFi is also facing competition from other technologies. JetBlue, for instance has won special licenses that all allow it to deploy wireless broadband on its jets and offer communication services. It remains to be seen what happens to that service.

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  1. Replace connexion with web2.0 and throw in the word investors in a few places and the story will read the same.

  2. .. and it disappeared before I could even try it out. I’d even pay $10 a flight to get wifi access (of course, it would be necessar for seats to have power supplies).

    This might all be moot if laptops are banned on planes.

  3. the laptop on the planes problem might have been the kicker here and pushed them over the edge and decided to throw in the towel. however in seriousness, i think lack of US market penetration is what really was the issue. No one loves their laptops more than the Americans.

  4. I thought you were referring to he new site Boeing, Boeing, Gone :)

  5. There isn’t enough data to say what the adoption problem was but I agree that support from US business travellers would have helped.

    Perhaps some marketing/product changes would have helped such as:
    – Bundling a nominal service charge into every transcontinental ticket price (a small % relative to the ticket price)
    – Giving the first 20-30min free for all users to try out the service.
    – Offering better entertainment options via the broadband connection (local streaming media server on the plane) so that you’re not forced to see the often weak movies being shown.
    – Processing your immigration paperwork online and having a printout delivered to your seat an hour prior to landing.

  6. This doesn’t make any sense. The JetBlue offering sounds identicial. What exactly was Boeing offering and on what routes? I’d easily pay $10-20/flight for net access. Was there really less up-take than for GTE Airphones?

  7. Great idea. Terrible implemetation.

    If you want US traction, it has to be AVAILBALE in the US. And I DON’T mean European/Asian long-hauls originating/terminating in the US. It had to be available on the Raleigh-Denver flights in addition to NY-LA. It has to be fleet-wide and reasonable ($9.95).

    This was idea that had to be deplyed o a massive scale before it was going to “take off” (no pun intended).

  8. I fly fairly regularly, once or twice a month, and I heard them announce WiFi availability on the plane for the first time when I flew JetBlue a few weeks ago. Does AmericaWest and Continental just not have the service available?

    Of course they are going to have terrible penetration if no one knows it’s available. The flight attendants still tell you that any sort of wireless device has to be shut off during flight, with out mention of it being allowed for Wireless Internet access available on the plane!

    It seems to me that they mothballed this product too early. They should have tried to determine why it wasn’t selling and to address those problems!

  9. I agree. I have never been on a plane that offered wifi, so to some extent US adoption never materialized, since US business travelers were never really given the option of trying the service out. I am on a plane from one coast to the other 2-3 times a month. I am sure there are others who travel way more than that. Did United, American, Delta, etc even give this a try on some routes? Not to my knowledge.

  10. I have not seen this service offered in the U.S. As a business traveller, I would love to have — and would pay for — easily accessible wireless internet, and cell phone services on a plane. This would be an enormous competitive advantage for any airline that could supply it. Given the fact that Boeing is building planes for most of the airlines, would seem they had the leverage to get their service adopted. Oh well, guess its time to fly JetBlue.

  11. Another example of corporate hubris. Time and time again these big companies think they are know-it-alls. I do not feel sorry for Boeing since they obviously were unable to dome down to Earth and understand real people, real potential customers (not just limiting to the long haul flights). Quite likely JetBlue does get it because they are not pompous and they understand their customer and potential market very well.

  12. The service is great (I’ve used it) and in a smart world would have survived, but both Boeing and the airlines weren’t that bright.

    They were asking the question “can we get the masses on an airplane to buy it at $30 a pop”. The answer is (and always was) “no, but that’s the wrong question”.

    The real question is “if we advertise that our flights have it, how much more can we charge and how many more tickets would we sell relative to our competitors.” This question was never asked – as much as I enjoyed it when it was avialable on Lufthansa, neither my travel agent nor Lufthansa could tell me ahead of time whether the flight would have it when I was booking my tickets. Thus, I was never willing to pay more, but because they didn’t know or promote it.

    It’s sad to see a good technical service collapse due to business stupidity.

  13. Wow… seems REALLY early to make the judgement that there’s no market. First, there’s minimal implementation, and second it seems short-sighted, since this isn’t something that we’re NOT going to have in the future. Tech doesn’t eliminate itself, it changes form. It seems like they could have retool, slowed down, redirected, something. But removing themselves from the inevitable running seems bizarre.

  14. Wow, that is some shocking news actually. I regularly (well, I don’t travel taht often, but…) used the service on the SAS flights between Japan and Scandinavia. The staff gave out free 1 hour try-out kits to everyone who wanted one, and marketing from SAS side was good – it was clear beforehand which flights had the service etc.

    But I can see the problem if the same could not be said for the US market – as you all say, that is where the big market potential is for this, not a few travelers from Japan…

    Too bad though, it was a good service and I will miss it (until something new comes along…)

  15. Glenn Fleishman Thursday, August 17, 2006

    “JetBlue, for instance has won special licenses that all allow it to deploy wireless broadband on its jets and offer communication services. It remains to be seen what happens to that service.”

    I keep seeing an emphasis on JetBlue, but they won the 1 MHz license. AirCell won the 3 MHz license, which is where broadband will actually be deployed.

    To the commenter who said he heard that Wi-Fi was available on JetBlue already — they may have been announcing free Wi-Fi in some JetBlue terminals, such as JFK.

    There is no Wi-Fi available in commercial aviation outside the Connexion service at the moment. JetBlue and AirCell haven’t even received their licenses yet; the final process is still underway at the FCC following the conclusion of the auction a few weeks ago.

  16. Glenn Fleishman Thursday, August 17, 2006

    One more thought. Another commenter asked how new domestic services would differ from Connexion. Connexion uses satellite bandwidth and they had to lease fixed transponders to provide worldwide coverage. That cost structure was part of their downfall.

    AirCell and whatever JetBlue deploys will use air-to-ground transmissions that will allow either company to build a relatively small array of ground stations. AirCell already operates ground stations for general (private) aviation, and has offered services for that market for several years.

    OnAir in Europe will use satellite for backhaul to planes, but they’re piggybacking on Inmarsat’s 4th generation satellites, which allow them to buy on a more a la carte basis. They don’t have to lock up and pay for transponders that they’re not using. Their usage costs will be quite high, and look for very high pricing on in-flight usage in Europe because of this unless a ground-station variant is launched, which seems unlikely in the near future.

  17. I was going to suggest that keeping a wi-fi router on board, with a simple local service for irc interaction might be amusing for passengers in the absence of net connectivity…but maybe not if you consider that this could be easily used for mustering activities of a terrorist nature…

  18. Michael Klinger Friday, August 18, 2006

    There is a bright side to this story, which I mentioned in my own blog entry yesterday. So far, not too many other folks are as pleased as I am about this big step backwards…

  19. Michael Urlockder Friday, August 18, 2006

    My view: Don’t trust what people say; trust to what they do.

    Market research said there was a big market for this service. But user actions suggest otherwise. As an example, onboard airline telephone systems are often idle, which lead Verizon to cancel its Airfone service.

    My hunch is that these activities would rate low on surveys, but are highly valued on airplanes:

    * Snooze;
    * Daydream;
    * Watch movie.
    

    More at:

    http://www.ondisruption.com/myweblog/2006/08/boeingpulls_pl.html

  20. Glenn has it dead on terms of the current state of the market.

    Don’t mis-interpret Connexion shutting down as a lack of demand for the service from passengers. The passenger usage has been growing consistently since launch and is exceeding the airline’s expectations. Lufthansa has indicated they will find a way to keep service live. The failure was to get a critical mass of airlines to cover their huge fixed costs. The high cost per plane and heavy equipment weight tempered airline adoption. The new solutions (AirCell) being rolled out in the US via ground networks solve both these problems and offer a more attractive price to the passenger.

  21. Don’t forget, it’s not just paying $30 for wifi, but even on a long flight, you only get it for 2-3 hours depending on the life of your laptop battery. not everyone travels with 2-3 charged batteries (and then you worry about them alighting on fire). If they coupled wifi with plugs to keep your laptops running, then maybe this makes a lot more sense quickly…

    -josh

  22. vinnie mirchandani Sunday, August 20, 2006

    Om, I think the US airlines did Boeing a dissservice by not allowing US consumers a choice – see my post at

    http://dealarchitect.typepad.com/dealarchitect/2006/08/thecustomers_w.html

  23. The lessons for FMC operators from airphones…

    Today’s announcement by Ryanair that they plan to enable GSM roaming on their flights provides a useful lesson to carriers thinking of deploying fixed-mobile convergence (FMC) solutions. Historically telephones on aircraft have been a commercial …

  24. The biggest problem that Boeing faced was a flawed business model based on flawed (and self-serving) market research.

    The second biggest problem they had was that they needed extremely high uptake (over 30% of passengers per flight) and 10x the number of flights that had been outfitted just to get to break even. Given that they could not control which carriers or which planes had the service, and since they were shut out of the US market, they had no chance of reaching critical mass.

    After these, there are numerous barriers to consumption that were never considered included:
    – access to power
    – space
    – security restrictions
    – lack of technical support for less sophisticated users that couldn’t figure out how to get in, or cope with need to change settings
    – competition for my time from everything else I could be doing that didn’t cost so much
    – desire by travellers to be off the grid for a while
    – did I mention the price was too high?

    See a detailed analysis of the numbers and marketing mistakes at:

    http://thewaythingsare.typepad.com/antimarketer/2006/08/boeing_booboo.html

  25. Boeing’s Connexion Service Bites the Dust…

    Loiclemeur reports that Boeing’s Wifi in the Sky service – Connexion won’t be offered anymore and it will be stopped due to escalating costs. Boeing Chairman, President and CEO Jim McNerney said “Regrettably, the market for this service h…

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