The need to stay connected 24×7 is putting pressure on governments the world over to allow in-flight connectivity (IFS) in their respective territories. India is no exception. In December 2018, the Department of Telecommunications (DoT) notified the Flight and Maritime Connectivity [FMC] Rules. The rules allow the provisioning of telecom (voice calls) and broadband services in Indian airspace and waters. Following the notification of the rules, the government has granted licences for the provision of these services and some players have even announced their launch plans. Currently, several discussions are taking place around the potential market opportunity, different cost and business models, and challenges associated with the provision of these services.
Progress so far
The notification of the FMC Rules was followed by the grant of in-flight and maritime connectivity (IFMC) licences by DoT to various players. These included Hughes Communications India, Bharat Sanchar Nigam Limited (BSNL), Indo Teleports Limited (a subsidiary of Bharti Airtel) and Tatanet Services Limited (a wholly owned subsidiary of Nelco Limited). Meanwhile, Reliance Jio has reportedly approached DoT with its licence application.
Soon after, in May 2019, Hughes Communications India and Bharti Airtel announced the merger of their VSAT satellite communications operations in India. As per the terms of the agreement, Hughes Communications India will hold a 67 per cent stake in the merged entity while Airtel will hold the remaining 33 per cent. Market reports suggest that the new merged entity will occupy 63 per cent of the Indian satellite communications market.
In the most recent development, Inmarsat has announced that it will offer its Global Xpress services in India, in partnership with BSNL, from 2020 onwards. Following the grant of the IFMC licence, BSNL is now in a position to offer IFMC services, which will include Inmarsat’s Global Xpress (Ka-band) services as well as SwiftBroadband and FleetBroadband (L-band) services. They will be offered to Indian airlines operating in and outside the country, as well as foreign airlines transiting Indian airspace, and shipping companies operating in Indian waters.
While the aviation sector still has to wait until next year for the roll-out of IFC services in India, maritime connectivity seems to have already taken off. In September 2019, Nelco announced the launch of maritime communication services, emerging as the first Indian company to offer quality broadband services to the maritime sector. Nelco will use satellite technology to provide voice, data and video services to sailing vessels, cruise liners and ships in India.
Factors affecting roll-out of IFMC services
Quality of service
Quality of service (QoS) is a key concern as terrestrial base stations, which have limited transmitting capability, are used for providing IFC services. Communication is prone to interference due to changing weather conditions, distance and noise. Satellites also face challenges in providing seamless IFC services. Satellites typically divide geographical areas into smaller zones when providing broadband connectivity. This requires frequent handoffs, which can be effectively carried out on ground but in airspace, it increases the level of interference and affects QoS.
With advanced communication equipment on board, aircraft networks will be susceptible to cyberthreats. It is imperative that separate channels are deployed to provide Wi-Fi so that they do not interfere with aviation communication channels.
The price point of these services will play a decisive role in determining how and when IFC services will be launched in India. At present, the industry is exploring various business models for the provision of these services. While one model prescribes the provision of services at different price points, another model suggests that the price of these services can be weaved into the total price of flight tickets. A third business model suggests providing services free of cost for a limited time duration, and later charging a nominal rate. Under such a model, price plans could either be volume based or volume and time based. For instance, Emirates offers 20 MB of free data to passengers. After this limit is exhausted, it charges its customers up to $9.99 (Rs 666) for 150 MB and $15.99 (Rs 1,067) for 500 MB. That said, industry analysts believe that the pricing models can vary from one airline to another.
As far as the uptake of these services is concerned, operators and airlines will have to collectively come up with innovative go-to-market strategies for the price-sensitive Indian market. Some industry stakeholders are of the view that unless these services are offered for free in the beginning, people will not adopt them. From a consumer perspective, Indian users are accustomed to cheap data rates and might expect some sort of concessions while purchasing these service packs. The provision of such concessions or incentives could help expand the customer base, but will come at the cost of revenue loss. As such, airlines and operators need to collectively explore alternative monetisation methods. An advertisement-based model could also be adopted.
Another aspect of cost dynamics is the cost of deployment. The first step in the provision of these services is equipping airlines with the necessary infrastructure. Industry reports suggest that the installation of equipment in aircraft will cost telcos around Rs 150 million per aircraft. In addition, an aircraft needs to be grounded for at least two days to install the system. A flat antenna needs to be fused and retrofitted on the aircraft to connect it to the satellite. This process could result in commercial losses for airlines. Given the current financial conditions of the aviation sector, most of the airlines will not be willing to suspend operations for multiple days at a stretch. Both these factors are roadblocks in the provision of IFC Wi-Fi services.
As per the FMC Rules, it is mandatory for the FMC gateways/servers to be located within India, a roadblock for international airlines. Further, only Indian satellites or those approved by the Department of Space can be utilised for the provision of IFC services. The Indian Space Research Organisation is the only entity allowed to provide satellite bandwidth for IFC. This will remove competition, resulting in high bandwidth costs. This will ultimately impact the cost of IFC services.
Opportunity and the way forward
India is the ninth largest civil aviation market in the world with 550 aircraft and annual passenger traffic of 265 million, including 22 per cent international passengers. The total number of passengers is expected to reach 420 million by 2020. According to a market report, 50 per cent of air travel is work related, which presents a $2 billion-$3 billion opportunity for IC providers. To realise this opportunity, the industry and the government will have to collectively work towards addressing the above-mentioned challenges. The government should create a favourable regulatory ecosystem to encourage active industry participation. Moreover, operators along with airline carriers will have to develop business models that are best suited for the Indian market rather than adopting international models. Net, net, the notification of the IFMC Rules is a positive move, which will bring India on a par with its global counterparts. Moreover, it will significantly improve the passenger experience, enhance tourism and bring in additional revenues for the civil aviation industry.