Internet access has become so ubiquitous to many of us that we barely notice it until we don’t have it. At home, cable broadband or DSL quietly connects our phones, computers, TVs, and even—for some of us—our light switches to the world-wide-web and the vast wealth of information it holds. While out and about, our phones are connected through the cellular network to that very same informational hub. Even when all else fails, Starbucks and its ilk will happily keep you connected. However, one of the few remaining places where we seem to surrender our entitlement to the net is… any guesses? On the plane.
Commercial in-flight WiFi has been around for the better part of a decade. In the time since, it’s gotten much faster, and the prices have gone down somewhat, but the speed still pales in comparison to the blisteringly fast internet offered at home, and it still costs more to use than many of us are willing to pay. But why is that? Why can’t it simply catch up, technologically speaking, with the experience we have grown shockingly accustomed to in-home. The truth is, it’s a big messy picture of supply and demand.
Since the beginning of commercial aviation, passenger communication to the ground has been a bit tricky. It has always been more expensive to send information over-the-air than through a wire, and typically, the farther the information has to travel, the more it is going to cost you. We saw this with the dawn of satellite phones stuffed into seat-backs in the ’80s, and we saw it when satellite TV first climbed aboard in the early 2000s; we had to pay then, and we have to pay for WiFi now. Simply put, the reason we can’t all have fast and free WiFi in-flight is a technology problem, precisely a problem with bandwidth. Right now, it’s more of a question of fast OR free.
At the price of free, we have what is essentially “maximum” demand. Everyone on the plane would be using the WiFi, requiring enormous technological investment on the part of the airlines to support this necessary bandwidth, which would likely result in a significant loss. This option is simply unsustainable in the long-term. Delta Air Lines (NYSE: DAL) has been highly ambitious in their pursuit of free WiFi for all of their passengers, starting a test program on select flights offering free WiFi. Unfortunately, the feedback was negative as there was an extreme lag in speed and sporadic loss-of-connection. In summary, the technology hasn’t gotten to a place where it is feasible to offer free WiFi without jeopardizing the quality and, consequently, the onboard experience.
Various airlines have used different strategies to overcome the balance of speed and price. For example, Delta was the first of many airlines to offer free messaging to all passengers, which is an impressive start to the end-goal, though messaging requires very low bandwidth. JetBlue Airways (NASDAQ: JBLU) has a partnership with Amazon (NASDAQ: AMZN), where Prime members receive free connection for any purpose, which is nice, though restricts the number of passengers who are eligible (to maintain speed).
At this point, you’re probably thinking, “Noah, airlines obviously love charging fees for anything they can. Why would they want to give us WiFi for free?” That is a valid point, though it’s arguably in the airlines’ best interest to give their passengers free WiFi. To understand why let’s look at the notorious bag fees that took the industry by storm a while ago. Most of the operating costs for a flight comes from the fuel expense, and more weight means more fuel. Bags are heavy, so by charging the passenger to check a bag, they cut their loss and get compensated for the extra fuel burned. Customers, on the other hand, are entitled and don’t want to pay for anything without getting compensated themselves. That’s where free WiFi comes in: WiFi is so important to us that getting it for free keeps us happy and complacent, and for better or for worse, we probably value it more than a checked bag. We see it as the airline going above and beyond to meet our needs, what the airline sees is a distraction so they can quietly jack up the prices on everything else that costs them much more than the WiFi, for example, checked baggage or those mysterious “fuel surcharges.” What’s more, free WiFi is a substantial enhancement to the on-board experience along with free television and “mood-lighting.” These are also mere distractions so the airlines can quietly decrease legroom and pack in more rows, upping the number of paying passengers—the WiFi costs to the airline stay the same (more or less) despite adding a handful of people.
At the end of the day, WiFi on planes as-it-is offers little to be had in the way of profits for the airlines; many operate on a loss after paying the provider. The reason for charging a price is that it keeps the demand low enough to where the quality is not compromised, and neither is the on-board
distraction experience. As technology improves, I have little doubt we will see free WiFi nearly across the board. On that day, I say, let it be fast and let it be free.
Interesting. I thought the fees were part of the general nickle and dime approach, but I hadn’t thought about congestion externalities. Good article!