Inmarsat explains why it is backing an ATG network in Europe

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The European-wide air-to-ground (ATG) network will become the new backbone for connectivity.

UK satellite giant Inmarsat recently announced that it is to develop a vast European-wide air-to-ground (ATG) network that will become the backbone of a new inflight connectivity solution.

But with its existing SwiftBroadband network, delivered by its I-4 satellites, and its upcoming ultra-fast Global Express (GX) service to be delivered via its I-5 satellites, the first of which is now safely in orbit, why does it need another network?

In a recent teleconference for investment analysts, Inmarsat Chief Executive Rupert Pearce outlined why the company was progressing with the service.

He said that the deal was a chance  to “capture a fast-developing market opportunity for inflight connectivity services in Europe”.

He added that it would develop an integrated air-to-ground network, operating in the S-band spectrum and delivering high-speed and high-capacity services.

“Our investment will replicate a proven successful model that has already been rolled out across North America,” Pearce said, referring to Gogo’s own ATG model that caters for airborne travellers in the USA and Canada.

“This has been an excellent business showing great growth dynamics.”

Announcing British Airways as the launch customer, Pearce also said that there had been strong interest from other carriers in Europe. In 2009 Inmarsat was awarded a licence to use 30 MHz of S-band spectrum (2 GHz) across Europe in a service that would combine both a satellite and ground infrastructure.

Pearce added that the announcement was the first step towards realising “substantial value” from this licence.

“Recently this segment [inflight connectivity] has started to show explosive growth,” he said. “Where passengers now expect a certain level of service availability and quality.”

Pearce added that as well as Gogo’s success, Inmarsat’s decision had been made after seeing AT&T announce that it too would be developing an ATG network in North America.

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Developing mobile telecommunications technology, such as 4G and LTE, has now made it viable to offer multi-megabit speeds from ground stations and in a cost-effective manner.

“We believe that there is a strong ‘read across’ from the North American to the European short-haul market,” Pearce said. “Like that market, Europe has a significant density of routes to make an ATG offering worthwhile.

“It offers a market size and revenue-generating opportunity that makes it more than capable of delivering a good return on investment for us.”

He said that more than 500m passengers flew on a connected aircraft in 2013. According to IMS research, 50 percent of the world’s fleets will have Wi-Fi connectivity by 2020.

Pearce added that the same research predicts a 20 per cent annual compound growth rate for inflight connectivity over the coming decade, by which time there will be around 6,000 short-haul commercial aircraft connected.

Pearce said that at the same time the uptake by passengers has, and will continue, to grow.

“The metrics from North America offer us some signposts for the growth of the European opportunity,” he said. “The average revenue per aircraft for Gogo has grown 400 per cent since it launched its service In 2009.

“It is now more than $100,000 [per aircraft] per annum and continues to see double digit growth. As such, the future of inflight connectivity as a business is assured.”

He added that he feels the new ATG offering will both complement and be complemented by its existing L-band SwiftBroadband and upcoming Ka-band GX networks.

“GX can offer infill opportunities in Europe and also extend the connectivity services globally,” he said. “As such, the two networks will offer seamless roaming between each other.

“This will be unique to Inmarsat and we believe it will be a major competitive discriminator for us globally,” he concluded.

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