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Thursday, June 17, 2004

Coffee, Tea Or Broadband via Forbes

Most Wi-Fi hot spots offering wireless high-speed Internet connections have failed to find a sustainable business model, since it's hard to make people pay for something they often get for free. Fee-based Wi-Fi on airplanes, however, looks like it is taking off.The onboard connection is not as fast as a land hot spot, either. Boeing figures it delivers 20 megabits a second from the ground to the aircraft, and one megabit a second back to the ground. Since the service is shared, individuals get about 100 kilobits a second each.A long plane flight full of anxious business travelers, however, is a very different marketplace from McDonald's. "People on planes want full Internet access--not just e-mail--and they're willing to pay for it," says Henry Harteveldt, travel analyst at Forrester Research. "Airlines, which pay probably $500,000 a plane to get Wi-Fi, would not do this if only 2% of people will pay. Our research shows something like 38% of frequent travelers will pay for this." For its part, Boeing anticipates running a profitable business on an uptake rate of 6% of total travelers.For Boeing, running a consumer service company is a break from tradition as well. Discounting the brief period after World War II when underutilized machine shops turned out bedroom furniture, this is Boeing's first consumer business. Carson says Boeing contracted out virtually all the hardware--the onboard antennas linking the plane to a satellite, which then feeds data back and forth with a terrestrial server, comes from Japan's Mitsubishi Electric, and the internal Wi-Fi gear is from Cisco Systems. Boeing wrote software, managed the project and interacted with some 22 airlines, most of which Carson expects to sign up over time.

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