Wireless technology has accelerated our lives at a remarkable rate. Previously, in 1999, one in three business travelers used a laptop computer. Just 3 years later, the typical business traveler carries a laptop, PDA and cell phone - the most advanced travelers are carrying cell phones with built-in PDA's, or instant messaging pagers. Remember queues at the airport waiting to use a payphone? Lines now are a thing of the past as cell phones have replaced fumbling for pocket change and phone cards.
While business travelers helped to pioneer the use of wireless services, general consumers also are pushing mobile communications to the next level. In Finland, people use cell phones equipped with Bluetooth technology, based on a "pico net" device designed for the last 10 meters within a wireless LAN to buy soda from vending machines and pay for their parking fees. In malls and on the street, they play electronic games with each other on their mobile phones without ever meeting in person. In the US, the business card has been replaced as people "beam" personal information from one PDA to another. This shift to a paperless world of instant communications and technological progress is a relentless forward movement.
But this apparent advancement toward a high-tech utopia is limited. Those who travel in a high service industry economy like the US feel continuous pressure to "be in touch" with clients, customers and colleagues. Maintaining relationships - essential in service industries -- demands near-continuous communication.
The Search for Ubiquitous Communications
At the same time, business travel is increasingly global. Flights are often long and the costs of calling from an aircraft are prohibitive. In-flight down time is enough to drive most business people stir crazy. Even those carrying a pager enabling them to receive messages in-flight become frustrated if they cannot respond. These factors leave many searching for the wireless services "Holy Grail," a device that allows ubiquitous, "always-on" wireless communications.
Interestingly, the future may not require multiple devices or even one device that does it all. Rather, the most successful device is likely to be one that can utilize any available means to log-on to the Internet, which in turn enables users to navigate email, private networks or the web. But such a device may be far in the future, given current limitations. For example, numerous cell phones deliver text messaging, email and limited Internet access, but most current technology does not provide the continuous, instant two-way connectivity users need to send and receive data from any location.
Airports face a unique, compound challenge. First, they serve millions of people who need to be connected to wireless devices 24/7. In addition, high noise levels, which spell doom for most small cell phone transmitters, have caused some US airports to consider offering wireless access inside the terminals. Airports also have lost a traditional revenue stream resulting from the demise of the use of public phones. Today the average pay phone earns a profit of $125 - $150 month with a provider cost of $100 per month. In 1999, Atlanta Hartsfield International Airport had a reduction in payphone revenue of $7,000,000. Additionally, Southern Bell is phasing out 143,000 public pay phones by 2003. So airports are now facing the challenge of how to ensure access to new revenue streams flowing from wireless networks inside their buildings.
However, airports are wary of such systems because of their limitations. For example, at Dallas/Ft. Worth International Airport, few users have used the wireless network DFW has installed for travelers. This is due to lack of content and expensive per minute fees, and because of varying technology standards: a wireless service at one airport may not be compatible with a wireless service at another airport.
Air carriers are caught between traveler needs and air regulations surrounding airports and airlines. Travelers are instructed to "switch off all electronic devices, such as laptops, until we are at 10,000 feet" or, in the case of cellular phones, keep them turned off for the duration of the flight. Even when the use of laptops is allowed, the cost to have an Internet connection is daunting. This may frustrate their passengers, but, seemingly, there is little that carriers can do.
On-board Wireless Solutions
Despite these challenges, there are many potential solutions on the drawing board including two notable offerings from Boeing and Tenzing Communications, both Seattle-based companies. Boeing's is the development of broadband access from aircraft, due to rollout by 2005. Tenzing Communications' wireless communications system is currently running using existing aircraft communications technology.
A few airlines have already implemented the Tenzing system, and two Tenzing employees proved the "beta" test and recently were able to send email to each other, from one aircraft to another. The Tenzing system is available gratis for a limited time; Boeing's offering will be initially available in the contiguous United States - but to date, no US airline has it operating. No customer costs have been released as of yet.
Wireless Pricing Models
In developing these technologies, the primary problem both Boeing and Tenzing face is cost recovery. Each company has conducted consumer research to develop price points and it is certain that business travelers want such services. But what is the consumer really willing to pay? Typically, communications access has been relatively inexpensive, especially in the US, where even a long distance call can cost just a few cents a minute. Proposed technologies may carry a much higher price tag than current wireless offerings, and one can be certain that the airlines will NOT underwrite these services.
On the contrary, airlines could see this as an additional revenue stream. The pricing scheme is likely to be similar to the ISP model, where a low monthly fee gives a user unlimited access. If this fee price were, for example, $50 per month, the impact would have significant revenue implications. Boeing estimates that every 24 hours, 3 million people board 42,300 flights around the world. Assuming only 10% of these people buy in-flight access, this potentially means $15 million in new revenues per month.
Air carriers have utilized other customer-facing technologies in the wireless space, however. Currently, many airlines offer wireless access to flight booking, schedules, status, paging and other services, and these companies want to control the content delivered to the traveling public.
Airports Use Wireless to Improve Customer Relationships
At the same time, airports are seeking alternatives to the kiosk model through technologies such as Bluetooth applications, which currently are being introduced at several airports. Using a PDA, travelers could locate their airport parking location after a long business trip or long-overdue holiday by accessing a map with Bluetooth. Airports also could work with content delivery technology such as AvantGo or Vindigo to provide wireless content such as food/beverage information, on-line shopping, GIS facility maps, flight information, city guides, entertainment and weather information.
Already, airports and airlines are already beginning to leverage wireless, Bluetooth, and hand held devices to help build their customer relationships. Airlines such as Jet Blue have employed wireless hand helds to employees to 'bust lines' during peak traveling periods. Jet Blue employees can check-in passengers from virtually anywhere in the airport. This not only reduces the need for a passenger to stand on line at all, but also moves the staff person from behind a desk, increasing the face-to-face interaction with passengers. Alaska Air has taken this a step further to allow passengers to check themselves in from anywhere and just show a photo ID before stepping onto the plane.
Imagine how airlines and airports could operate in the near future using wireless. As a traveler enters the airport, the airport's wireless network immediately recognizes the traveler's hand held and offers to check the traveler and his/her baggage in. A nearby kiosk receives the signal from the hand held and prints out coded baggage tags. Once the traveler is freed from luggage, location-based wireless technologies point out retail sale opportunities as the traveler moves through the airport to the gate. Since the internal 'smarts' in the hand held know how much free time the traveler has until his/her flight, the airport can try to take advantage of the traveler's free time in a productive way without becoming too obtrusive. After landing, the destination airport can narrowcast to the hand held in similar way for car rental, taxi, train, or retail opportunities. The revenue from these targeted advertising opportunities will most likely be shared between the airport (the owner of the network) and the vendor.
Meanwhile, the Bluetooth-enabled baggage tags are able to prevent one of the top three problems associated with a traveler's unpleasant experience - mishandled luggage. The tags will complain when an attendant or conveying machine attempts to place luggage on an incorrect flight. When the bags have been placed on the correct flight, the baggage tags may also be able to notify the traveler via the hand held, providing reinforcement that the passenger and his/her luggage will not be separated. Not only will airlines increase customer satisfaction and retention through offering a 'no lost luggage guarantee', but they will be able to save on significant customer service labor and overhead costs.
Currently, with the rush to market, no one has stepped forward to become the seamless "broker" for delivery of content to wireless devices. Airports have the opportunity to step forward and play a new role in the value chain, and telecommunications providers expect to share more than 50% of revenues related to content provision. But whom will they be shared with?
The new roles and relationships will be complex. Trading models and revenues will differ from service to service and from airport to airport. The bottom line is that the airports own the land, facilities and infrastructure, and they control the passengers' wireless access on the ground. Airlines own the aircraft and control the passengers' wireless access in the air.
New Roles and Relationships for Airports as Network Providers
There are new revenue streams available on the horizon. The aviation community needs to come together and manage the process together, not divided. The models for new revenue streams will vary -- for example, "access fees" for users on the airports' wireless LAN might include charges to passengers, the airlines, air cargo and others. 3G Technology globally may have "free user access," with revenue realized by "commission on sales" and "advertising revenue."
One thing is certain: the future of wireless communications for travelers is somewhat cloudy. Need and demand are obvious, and technology developers like Boeing and Tenzing are working to bring solutions to market. However, significant issues remain.
Airports are unlikely to fund the kind of major technology venture this could entail, even if the airport revenue opportunity is real. Dallas/Ft. Worth, Atlanta, Los Angeles and Chicago all have over a quarter-million people pass through a potential network every 3 days. If only 20% of these people were to access a reliable wireless network at the rate of $1, the airports could boast a significant revenue increase every month. But past experience developing kiosk and other systems makes many airport administrators weary.
Will the Traveler Pay?
And it is unclear whether travelers will be willing to follow an ISP model, paying a flat fee each month for ubiquitous access in addition to their other communication costs? Provided that the wireless network is stable (travelers know how critical this issue really is) and seamless from one airport to another, a fee of, for example, $100 may be worth the cost to frequent travelers.
Although financial proof is a serious burden for the air transport industry when it comes to IT, the litmus test for the wireless future in transportation will be equally about cost recovery and network stability.
Currently, about 3 billion business travelers are looking for solutions to their communications woes. And, increasingly, average consumers demand the same connectivity and interactivity as professional air travelers. Although the revenue potential is significant given this market, the airports, airlines and consumers who ultimately will pay for their wireless utopia will have to be convinced of its stability.
As the failed global satellite phone company Iridium showed us, unstable service at too high a price point will play havoc on even the best wireless network offering. The need for reliable mobile technology continues to grow, but who will risk Iridium's fate to build a network? And who will deliver and control the content?
Companies like Boeing and Tenzing may be taking the first bold steps, but it will take a lot of mining to reveal a silver lining behind the cloudy future of wireless.
Addison Schonland and Stephen Blessing are principal consultants and Scott Rompala is a managing consultant with PA Consulting Group, a leading management, systems and technology consulting firm, with a unique combination of these capabilities. Established almost 60 years ago, and operating worldwide from over 40 offices in more than 20 countries, PA draws on the knowledge and experience of around 4,000 people, whose skills span the initial generation of ideas and insights all the way through to detailed implementation.