In-Flight Wi-Fi Turbulence: Travelers Reluctant to Pay

CIO — In 2008, the number of commercial aircraft that offered in-flight Wi-Fi service totaled just 25, according to market researcher In-Stat. By the end of 2010, however, In-Stat predicts that number should reach 2,000 planes.

Based on these numbers, it's clear the airline industry sees in-flight broadband services as another critical offering for its customers—and also a way to make more money off travelers.

The top 10 U.S. airlines have all started deploying in-flight Wi-Fi systems, according to In-Stat, and by 2013, airlines around the globe will likely have invested nearly $500 million in on-board broadband equipment and services.

Here's the rub, though: Passengers aren't swiping their credit cards to pay for the service.

[Also see: 5 Signs There's Probably No Wi-Fi on Your Next Flight ]

In-Stat VP of mobile Internet research Frank Dickson notes in a report that current "paid take rates" for in-flight Wi-Fi service (a.k.a. passengers buying it) are below 2 percent.

"Providers have a lot of work to do to entice passengers to use the service," Dickson says in the report. "Significant investment has been made in on-board and on-ground infrastructure, and now the market will be tested as it tries to get more passengers to use the service."

"A Public That Is Resistant to Pay"

With such a captive customer base, especially those traveling on business who demand anytime/anywhere Internet connectivity, it may seem surprising that airlines cannot attract more customers to pony up the $12.95 for in-flight Wi-Fi. (That's what it would have cost me on my last flight on Virgin America. I had incorrectly assumed the service was free and declined to use it once I saw the price tag. Another business traveler, seated next to me, paid for it and would expense it to his company. The Gogo in-flight Internet service is one popular way passengers are connecting these days.)

In fact, the situation the airlines now face—customers refusing to pay for Wi-Fi—is entirely predictable.

For the last half of the decade, restaurants, hotels, airports and coffee shops struggled with whether to charge or not for Wi-Fi hotspot access in their establishments, even though customer surveys showed overwhelmingly that they expected gratis hotspot service, despised complicated log-in/payment processes, and showed preference to those businesses that offered it for free. (In-Stat survey research finds that availability of free Wi-Fi does influence venue choice among 95 percent of users.)

Then the dominos began to fall. In 2009 and on into 2010, Wi-Fi hotspots became as complimentary as napkins and ketchup at many restaurants and retail establishments. For example, McDonald's (MCD), Barnes & Noble (BKS) and Borders joined Panera Breads in offering the free service.

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