In the future, Internet access on airplanes will be faster, more reliable and much more widely used than it is today—and AT&T (T) wants a piece of that action.
The telecommunications company on Monday announced plans to launch a high-speed, in-flight connection service late next year based on 4G LTE technology. The move anticipates that the industry—still in its earliest days—has room for further competitors. AT&T said it will work with Honeywell International (HON), a major avionics supplier, on a new air-to-ground network.
The news sent shares of Gogo (GOGO), the current largest provider of in-flight Internet, down more than 18 percent in after-hours trading. A second provider, Global Eagle Entertainment (ENT), the parent of Row 44, fell 10 percent after the regular close.
In-flight Wi-Fi has been marred for several years by spotty performance and an inability to find pricing that appeals to most travelers. For the most part, in-flight connection has remained expensive as airlines and their suppliers resolve numerous technical hurdles and figure out what can work operationally and financially. The generally slow speeds and overall limited user experience have lured few paying customers. When Gogo went public in June, the company said only about 6 percent of passengers on flights offering the service actually become customers.
AT&T will confront a field that also includes Panasonic Avionics, Thales (HO:FP), and LiveTV, a satellite-based TV and Internet provider that JetBlue Airways (JBLU) is selling to Thales. The companies use an array of technologies to make Wi-Fi work at cruise altitude, and several airlines—including Southwest (LUV) and United (UAL)—have made bets that satellite-based systems offer the best opportunities for speed and flexibility.
Regardless of the technology, the industry sees a bright future as millions of travelers around the world tote tablets, smartphones, laptops, and other Web gadgets. At 35,000 feet on a 15-hour flight to Asia, the best in-flight entertainment may well be whatever you decide to stream. Still, if reliability ceases to be an obstacle, the boss may expect that report by the time you land.