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Changing Attitudes about IFC Driving ViaSat Revenue Strategies

By | February 12, 2015
      ViaSat in-flight network Switching aircraft

      Aircraft switching from beam to beam or satellite to satellite. Photo: ViaSat

      [Via Satellite 02-12-2015] ViaSat Chairman and Chief Executive Officer Mark Dankberg sees an opportunity for new in-flight Wi-Fi strategies and technology to drive revenue for the company, even in the face of a shrinking U.S. market. In a conference call regarding an otherwise underwhelming third quarter earnings report — in which the company reported 18,000 in net adds against an expected 20,000 — ViaSat saw potential for growth in its In-Flight Connectivity (IFC) business portfolio in conjunction with a fluid, revenue-driving strategy.

      “Aviation broadband and consumer broadband are the big growth drivers in ViaSat’s business in both the near and medium term,” Andrew Spinola, senior analyst at Wells Fargo told Via Satellite. Last quarter ViaSat reported strong aviation shipments with 276 total planes in service to date. But with its major airline customers expecting near completion for installations on their contracts by mid-2015, Spinola warns that the company needs to score contracts elsewhere to keep the momentum going. “The aviation business will slow after JetBlue and Continental are fully activated unless ViaSat wins additional business,” he said, noting that there are few commercial aviation opportunities left in the United States.

      ViaSat’s CEO doesn’t seem phased, however, and hopes to grow this market through new revenue-driving strategies that follow what he believes to be a changing attitude surrounding the expectations of price, speed and reliability in the IFC market.

      “Everyone pretty much took for granted that in-flight Wi-Fi was kind of slow, independent of the price point. Airlines were focused on just checking the box to say they had Wi-Fi … but here you can see attitudes are definitely changing,” said Dankberg in reference to an image on Routehappy.com illustrating customer satisfaction with the Exede Wi-Fi offering available on JetBlue. “Now, we are seeing increasing attention paid to the quality of the Wi-Fi by the airlines. In-flight Wi-Fi is more and more seen as more than just ancillary revenue. More airlines are asking questions about how the best Wi-Fi could be monetized and integrated into a holistic brand strategy. It’s not yet totally clear what those monetization strategies are but, as in most things, Internet and mobile economic value tends to follow user engagement.”

      ViaSat is already working out ways to up user engagement alongside JetBlue, with tactics such as offering the service free-of-charge through a series of strategic partnerships.

      Additionally, technology-related strategies are also coming into play. Particularly in terms of addressing latency concerns, which still pop up as an issue when it comes to pitting the satellite-based offering against the more traditional Air-to-Ground (ATG) services. However, Dankberg believes the company can overcome the latency challenges through enhancing speed and bandwidth.

      “We believe that the dominant measures of technical performance for broadband really are speed and bandwidth,” Dankberg explained. “Yes, latency is important, but for the vast majority of Internet traffic, speed and bandwidth are what’s decisive.” While the company has expressed interest in combining its satellite offering with an ATG system, it feels that improving these areas may be even more effective in providing customer satisfaction than lower-orbit satellites, which can provide lower latency than geosynchronous ones.

      ViaSat is also enthusiastic about its Ku/Ka band satellite system coming into play with ViaSat 2 as well as a dual-band offering antenna the company is planning to introduce later on this year. The Ku/Ka offering will be available for the government market alongside the commercial sector. The somewhat lackluster quarter may work against the provider’s future plans, however.

      “The lower levels of net adds have some investors concerned that the market won’t be there to support ViaSat 2, but there are a number of reasons that ViaSat is confident in the case for V2, such as the greater total capacity, substantial increase in coverage, and technology innovations that will allow for meaningfully greater data allowances on V2 service plans, according to the company,” said Spinola, who noted that ViaSat has hinted that the expanding offering may even see new markets, such as the business aviation segment. And ViaSat 2 may well open the door the company needs to keep the IFC business booming despite the lack of U.S. airlines looking for new connectivity.

      “Fundamentally, we see bandwidth economics as the enabling technology,” Dankberg said. “Next year ViaSat 2 satellite will be a big step forward compared to ViaSat 1 in both bandwidth economics and geographic coverage. There aren’t any other Ku- or Ka-band satellite systems coming that have bandwidth economics even close to ViaSat 2.”