Originally published by Josh Blackman.
Air travel has been revolutionized over the last two years–for me at least. First, the FAA eliminated the idiotic rule that prevented me from using my phone during takeoff and landing. That would eliminate roughly 30 minutes of productivity from every flight. Second, United (my airline of choice in the hub of Houston) has expanded Wi-Fi coverage to almost its entire fleet. This has increased my productivity in ways I can’t even describe, especially on flights during the day that are more than 2 hours long. On flights where the middle seat has been empty, I’ve even been able to set up my second monitor. With Wi-Fi, I can do everything I could do on the ground, in the air. I’ve even purchased the WiFi over my phone, and tethered over bluetooth to my laptop, so I can stay online without paying again when the laptop ban goes into effect during takeoff and landing. It has been a game-changer.
United, unlike American and Delta, does not rely on Gogo. Rather, it uses its own proprietary service, United WiFi. Unfortunately, United does not allow for a monthly subscription, but the FAQ says “we may offer these options in the future.” As a result, I pay the full price every time I fly. I’ve noticed that the rate bounces around, almost randomly. Here is a sampling:
- IAH – EWR, 3 hours cost $11.97 (Friday)
- IAH – MIA, 2 hours cost $7.98 (this was a mistake, as there was no coverage over the Gulf of Mexico)
- IAH – DCA, unlimited for $6.99 (Sunday)
- IAH – DCA, unlimited for $4.99 (Friday)
- IAH – EWR, unlimited for $3.99 (Thursday)
- IAH – EWR, unlimited for $8.99 (Wednesday)
In other words, the prices for the same destinations are all over the place, even on the same trip. I suspected some sort of surge pricing was in effect. The New York Times confirms this may be the case, at least with respect to GoGo.
Consider the following increases: Wi-Fi service on transcontinental flights — such as from San Francisco to New York, from Boston to Seattle or from Los Angeles to New York — now cost $28 to $40, up from roughly $18 in 2012, according to Gogo.
Yet those numbers rarely show up in the average price quote for an in-flight Gogo Wi-Fi session, which now amounts to about $12, up just slightly from $10 in 2012. That’s partly because on flights where fewer people are likely to use Wi-Fi, pricing has remained unchanged, which brings down the average cost per session. For example, Gogo’s Wi-Fi service on flights between New York and Fort Lauderdale, Fla., has cost $10 since 2012. In addition, passengers can choose to pay smaller amounts to use Wi-Fi for a portion of a flight instead of the entire trip.
Gogo’s prices are not just higher now; they are also more unpredictable. The company uses a method called dynamic pricing, in which it tries to forecast the demand for Wi-Fi on each flight and scale pricing accordingly. So the prices for the full durations of transcontinental flights also change each day: Gogo charges the most, $40, on Mondays and Thursdays; Tuesdays, Wednesdays, Fridays and Sundays cost $34; and Saturdays are the cheapest, at $28.
At first travelers may balk at the high prices, but there is a good reason for it–congestion and limited capacity. Wi-Fi in the air is a classic example of scarce resources.
Michael Small, the chief executive of Gogo, said in an interview that the company had raised prices because demand for Internet service in the sky had exceeded capacity.
“We’re starting to have millions of users, so it’s getting more and more congested, and we have raised prices, which you typically do when you have more demand than you have supply,” he said. “There’s nothing to apologize for. We have trouble finding a business in America that does anything differently.”
Part of the reason Gogo’s costs can be so high is that the prevailing technology it uses has hit some limits. Its in-flight Wi-Fi works like the cellular network that provides service for cellphones, in which antennas are used to transmit signals to and from towers on the ground. Adding capacity is difficult because there is a limited amount of radio spectrum available for the towers.
To improve the situation, Gogo uses satellite technology for over-water flights, and the company is upgrading to a faster satellite technology called2Ku. The new satellite technology, which received regulatory approval on Monday and will be widely released next year, should add capacity and eventually let the company lower prices, Mr. Small said.
“When we start rolling out the satellite technology and bring out more capacity, we’ll be back in the business of trying to bring on new customers and grow the business and introduce exciting new price plans,” Mr. Small said.
Consider Southwest, which does not have variable pricing.
Southwest has about 550 aircraft equipped with Global Eagle Entertainment’s Wi-Fi services, said Kevin Kleist, Southwest’s manager of Wi-Fi and in-flight entertainment. He said the company had experimented with different prices before concluding that $8 was the sweet spot.
“You don’t want to overprice and not get enough customers. And you don’t want to underprice it and get too many and too much congestion,” Mr. Kleist said.
With respect to Southwest, I recently took a flight and paid $8 for Wi-Fi. I noticed that many people on the sold-out flight were signed onto their phones. It was so slow, it became unusable. It was a waste of money. The Wi-Fi on United is really fast. I can even search WestLaw and other cumbersome databases with ease. On Southwest, the same search was so slow it became a waste of time to even try.
I wish United offered an unlimited monthly package, which GoGO does. I would buy it in a heartbeat. Or at a minimum, give customers with status, or who are in Business Class a steep discount.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
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