Wi-Fi at 20,000 Feet

May 7, 2009 (CNN) A number of domestic airlines have recently begun offering Wi-Fi Internet access aboard planes, and other airlines say they are working toward making it happen. "This is the year" for Wi-Fi on planes, said Jack Blumenstein, president and CEO of Aircell, whose Gogo® Inflight Internet service provides access on Delta Air Lines, American Airlines and Virgin America flights, and will begin testing on United flights later this year. Gogo is installed on more than 190 commercial planes, and Blumenstein said he expected 1,200 aircraft to have Gogo capability by the end of 2009.

For now, Wi-Fi on domestic carriers' planes is limited to flights within North America. Gogo, which operates by transmitting signals from ground-level towers, functions across the United States and up to about 300 miles offshore. The company's access will cover the entire continent within a year or two, Blumenstein said.

Row 44, which uses satellite technology to provide connectivity to Southwest Airlines and Alaska Airlines, already covers much of North America and will roll out trans-Atlantic and European service in the third quarter of this year, said the company's CEO, John Guidon.

Neither company would release the exact cost of turning airplanes into Wi-Fi hot spots. But Blumenstein said Aircell managed to equip a plane for "substantially" less than $100,000. Row 44, which bills itself as the "industrial-strength solution" to airplane connectivity, costs hundreds of thousands of dollars per plane, Guidon said.

Another company, LiveTV, is a subsidiary of JetBlue that provides free e-mail and messaging aboard flights but doesn't offer open Web surfing. LiveTV, which uses air-to-ground technology, provides the service on select JetBlue flights and also is working with Frontier Airlines on offering Internet access aboard its planes.

The Wi-Fi venture has the potential to be "very profitable," said Harlan Platt, an airline industry expert and professor of finance at Northeastern University in Boston, Massachusetts. "Normally, air carriers rush to purchase capital equipment that raises their cost but doesn't raise their revenue. ... This is actually a revenue-producing tactic. And it's a good one because it's providing value to the passenger and it's creating incremental revenues for the airline," Platt said.

Aircell, which shares its revenue from Gogo with the airlines, charges $9.95 for flights under three hours, $12.95 for flights longer than three hours and $7.95 to use a Wi-Fi capable handheld device for any flight length. Passengers can begin using the service once the plane reaches 10,000 feet. If the plane remains in flight for longer than three hours as part of a delay, passengers do not pay the higher fee, Blumenstein said.

Platt believes that business model will evolve to entice more passengers to use it. The size of those fees could result in "a whole segment of the market that they're not going to capture," said Platt. The airlines will maximize their profits by convincing more passengers to use the system with a lower price, he said.

Platt predicted Aircell and the airlines would create a second tier of service, which would be less expensive but with fewer capabilities. He compared the strategy to airlines' price-reducing tactics to avoid empty seats on planes.

As Aircell and Row 44's services expand, LiveTV is monitoring passengers' usage to gauge how to move ahead with its own business model, said Mike Moeller, vice president of sales and marketing for the company.

"Yes, broadband is coming. We're sitting there asking, 'Who pays? Is it the airlines or the customers? And what will they pay? What is the right technology? ... When does all of this happen?' We're in weird economic times," Moeller said.

As for the possibility of passengers offending their seat-mates by surfing for inappropriate content, Blumenstein said nine months of Wi-Fi availability on American yielded no such incidents. Still, airlines including American, Delta and United have requested screening for potentially offensive content, he said.

On the other hand, Alaska Airlines, which uses Row 44, does not plan on using the company's content-blocking capabilities. Instead, flight attendants will follow standard protocol for objectionable material -- they'll ask passengers to stow it away, said Bobbie Egan, an airline spokeswoman.

Here is what major U.S. airlines offer, and what is coming up:

Alaska Airlines offers in-flight Wi-Fi through Row 44. The airline said it launched a trial in mid-February on flights along the West Coast to determine usage and demand, and announced in April it would begin to determine pricing.

American Airlines announced in late March it would install Aircell's Gogo on more than 300 domestic aircraft over the next two years.

Delta Air Lines is using Gogo, and will have Wi-Fi capabilities aboard more than 330 aircraft by the end of this year, the airline announced in August 2008.

Frontier Airlines uses LiveTV for its in-flight entertainment. The airline is testing a LiveTV product that would provide Wi-Fi, which they hope to launch by the end of the year, said Frontier spokesman Steve Snyder. Pricing has not yet been determined, he said.

JetBlue provides limited, free Wi-Fi on its BetaBlue aircraft using LiveTV. Services include e-mail access through Yahoo! Mail, Microsoft Exchange, Gmail, Windows Live (Hotmail, MSN, Live) and AOL. Passengers can transmit Yahoo! instant messages and shop on Amazon.com's mobile site, and those with BlackBerry smart phones can access their accounts. JetBlue is not ruling out the possibility of offering expanded services for a fee, said company spokeswoman Alison Croyle. The airline plans to roll out the LiveTV service on more of its fleet this year, she said.

Southwest Airlines is testing Wi-Fi on four of its aircraft using Row 44 technology. After testing, which will probably last through April, the airline will determine pricing and how it will install the product on the rest of its fleet, spokeswoman Whitney Eichinger said.

United Airlines will use Gogo technology as it begins testing Wi-Fi on flights between New York and California in the second half of this year. The airline will decide on availability elsewhere after assessing feedback from testing, said United spokeswoman Robin Urbanski.

Virgin America offers Wi-Fi using Gogo on all flights between Washington and Los Angeles, California, and all of its Boston routes. The airline said its entire fleet will have Internet access by the second quarter of this year. In addition to Gogo's standard rates, Virgin America offers a rate of $5.95 for red-eye flights.

Airtran, Continental and US Airways do not offer in-flight Wi-Fi, but representatives for those airlines said they are looking into it.