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Wendy is an IFE Agent responsible for aggregating airline news specifically related to Inflight entertainment. She compiles stories relevant to business travelers, airline industry folks, marketers and tech geeks. IFE News doesn't create original content, but rather posts compelling editorial from global media outlets.

Why Wi-Fi In The Sky Just Got Ridiculously Expensive

By Allison McCann

If you’re flying between New York and San Francisco on Virgin America, getting online coast-to-coast using in-flight Wi-Fi could now cost you as much as $60. You can actually fly to another place from San Francisco for that much money.

Before you get all everything is amazing and nobody is happy, inflight Wi-Fi is awesome — but spending $60 on a cross country flight for internet speeds that can’t stream Netflix (or post to BuzzFeed — I tried) is not so awesome. A PandoDaily journalist was the first to notice that Gogo’s standard fare of $15 for the day (or $12.70 if you buy ahead of time) wasn’t available on his Virgin America flight from San Francisco to New York, and instead cost $10 per hour.

“We’ve been experimenting with different pricing on the flights we’ve seen with heavier use, to make sure pricing keeps up with demand,” a spokesperson for Gogo explained to me. “There’s a limited amount of bandwidth on the plane, so we want to make sure the pricing reflects the demand on any given flight.”

In other words, people are actually using in-flight Wi-Fi now — and there’s enough demand, on certain flights, that Gogo can charge more. Low supply + high demand = higher prices. Gogo has seen a 25 percent increase in inflight usage this year, up from 4.3 percent of flyers in the first six months of 2011 to 5.4 percent in the first six months of 2012. Five percent of all flyers doesn’t really make it seem like inflight Wi-Fi is in high demand, but this number is for every flight with Gogo. Shorter flights might have usage rates of 1 percent, but the Virgin flights from SF to NY are up to 26 percent of passengers. A lot of people chomping on tiny bit of bandwidth is the reason Gogo either has to hike its rate or change its system altogether.

The problem with Gogo’s prices stems from the fact each flight has a limited amount of bandwidth — about 3 megabits per second, or slower than what any smartphone made post-2008 is capable of — which it can’t change. Back in 2006, Gogo (formerly Aircell) purchased the exclusive rights to the air-to-ground (ATG) spectrum from the FCC and FAA for $31.3 million. They were the first to get into the inflight Wi-Fi game, and because of this, no other service can touch the 150 skyward facing towers that Gogo has scattered across the country. In ATG transmissions, radio waves from the ground send a signal up to a small antenna on the plane as you travel from tower to tower, which explains why internet speeds can vary throughout the course of a flight. But because Gogo is working with a fixed spectrum, there’s only so much bandwidth to go around — which explains why it’s experimenting with prices on Wi-Fi-heavy flights. Pointedly, Gogo remained mum about exactly which routes and carriers will be affected. “You will start to see more time-based pricing, rather than purely segment-based products from us,” said the Gogo spokesperson.

“It’s another clever tactic to ensure quality bandwidth,” IMS Research analyst Rose Yin told me. “But it’s really testing the market to see how far you can push.” In a survey of 1,000 passengers traveling domestically, IMS found that people thought $4 to $5 for inflight Wi-Fi was the average value for their money, though they’d still be willing to pay $7 to $10. Anything above $12 is getting too expensive — and these amounts didn’t vary much between longer and shorter flights. These amounts weren’t necessarily what people paid, but what they thought about paying those prices for inflight Wi-Fi.

 

The reaction to Gogo’s $10 per hour rate is pretty spot on, then, because it’s about as much as people are willing to pay (for an hour). And since alternative options are limited — Gogo currently services 1600 aircrafts across nine different airlines including Virgin America, Delta, and US Airways — there’s a good chance you’re flying with Gogo. While other airlines are starting to journey into the complicated world of streaming internet onto a metal beast speeding 500 miles per hour 35,000 feet in the air, it’s going to be awhile before passengers can fly around Gogo’s monopoly (pun intended).

 

 

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