AirCell Beats Competitors to Take ATG License
The FCC air-to-ground auction appears to be essentially over, with AirCell the all but guaranteed winner of the key 3 MHz license to offer wireless broadband service on commercial airliners. The firm’s high bid was $31.3 million. AirCell, which already offers Internet services to the general aviation market, is expected to have little to say for several weeks after the auction ends on its plans for building out a network because of anticollusion rules.
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The main remaining auction question is whether Space Data will top a $2.6 million bid by Jet Blue’s LiveTV for the 1 MHz license.
The big surprise was that Verizon Airfone, presumptive front runner for the 3 MHz license, dropped out without making a real run at acquiring the spectrum. Only 3 bidders remain, but LiveTV and SpaceData, focusing on the 1 MHz license, are deemed most unlikely to make an offer for the 3 MHz license.
Harry Harteveldt, a travel industry analyst with Forrester Research and former airline executive, said Thurs. he wouldn’t be surprised if Verizon tries to buy AirCell, bidding as part of AC BidCo. “Verizon is run by some really smart people,” Harteveldt said: “They may feel it makes sense to let AirCell develop this and then buy them. I suppose they did so for very good reasons. AirCell will have 2 options. They either have to find a partner with a ground network or they'd have to build out their own network and that’s going to be expensive.”
Other analysts say Verizon sat out the auction to focus on more critical areas, such as its attempt to buy Vodafone’s share of Verizon Wireless and the coming advanced wireless services auction. “I'm not surprised,” Jessica Zufolo of Medley Global Advisors said: “The Airfone business has been less than profitable for them.”
“It’s weird when the obvious players with an obvious advantage don’t bid,” Glenn Fleishman with Wi-Fi Net said: “Verizon had an incredible incumbent advantage.” Fleishman said he expected bids by Boeing, which operates Connexion, a satellite-based high speed Internet service some airliners offer. “I can only think they had too many problem,” he said: “They know how to run this kind of business too.” AirCell may or may not need partners, Fleishman said. Installing Internet systems on planes will cost $25,000- $100,000 per plane, and that doesn’t include ground network costs, he said.
Bidding for the 1 MHz license also appears all but over. LiveTV has been the dominant bidder, but Space Data has kept making bids for an alternate 1 MHz license. By slowly raising its bid for that license, SpaceData has bought time in what an air-to-ground expert termed a “rope-a-dope” strategy. Sources said the company may be putting together financing or trying to decide whether to challenge LiveTV.
LiveTV’s purchase of the 1 MHz license would put other airlines in a tough position, Harteveldt said. “JetBlue as a competitor is very serious about improving its profits,” he said: “Other airlines won’t want to use the LiveTV spectrum, or will resent using it because it’s basically paying a competitor. If they don’t use it JetBlue gets a tremendous advantage over every other airline in the U.S.”