September 28, 2005 – “WE have to grow the airline base, and we have to grow what we get out of the airlines that we already have. Internet service alone is not enough.”

Speaking at last week’s WAEA show in Hamburg, Connexion by Boeing VP marketing and direct sales David Friedman was frank in his assessment of the commercial challenge facing the satellite broadband provider.

“We’re talking to a number of potential new airline customers around the world, though the USA continues to be a difficult market,” he said. “And we’re looking at various ways to get more revenue out of the relationships that we already have.”

These include the recently announced deal with search engine operator Yahoo!, redoubled efforts with Connexion’s associate service providers, and a new promotion offering passengers free Internet access for the duration of a single flight.

“We’re looking for the halo effect of being associated with high-quality, very familiar partners like Yahoo!,” Friedman said. “The Yahoo! relationship is designed to boost usage and also to generate revenue directly: we and the airline get a return for every Yahoo! access via our system.”

Other revenue-generation methods under consideration include the offering of “per-per-view” premium content such as sports Webcasts and financial information from publications such as the Wall Street Journal. “We’re talking to a variety of different suppliers,” said Friedman, who emphasised that all of Connexion’s revenue initiatives were based on a sharing arrangement with the host airlines.

Connexion is still working to acquire associate service providers (ASPs) and has agreements with 22 of these terrestrial Internet and wireless service providers to date, with one more, believed to be AT&T, due to be announced soon. “But we are putting most of our effort into developing existing ASPs and maximising usage via their channels rather that just trying to build numbers,” Friedman said.

Under the label “Discover inflight Internet,” the promotional card offer runs to the end of July next year. Cardholders are invited to go to the inflight Connexion homepage and log in with the username and password provided on the card to enjoy access to the system throughout the flight. The company calculates that once they have tried the service free of charge, passengers will return to it on a paying basis on subsequent flights.

Meantime, Connexion continues to broaden its service offering. Onboard cellphone is under development, “though we don’t expect to be able to offer a service before the end of next year at the earliest.” The company’s Connexion One aircraft will be in Europe next month to demonstrate onboard and cellphone and inflight television.

On the technical side, Friedman said that while Connexion had not ruled out the use of noise-floor lifting to ensure that passenger phones cannot hear and attempt to respond at full power to ground networks, it was also considering other solutions. These include window shielding in the form of transparent metallised appliqué.

Connexion is also developing a closed-loop VoIP capability to allow passengers to talk to ground-based customer-care representatives. At the same time, Friedman remarked, passengers are also informally using software from the likes of Skype and Vonage to make laptop-to-laptop VoIP calls through the Connexion system.

Summing up Connexion’s current commercial programme, Friedman noted that it was not until ten years after service launch that the US mobile phone industry began to achieve positive cash flows. “Our current estimate is that we will start seeing a return on investment by 2011,” he concluded.