The Department of Telecommunications (DoT) notified the Flight and Maritime Connectivity (FMC) Rules in 2018. The rules allow the provisioning of telecom (voice calls) and broadband services over the Indian airspace and in the Indian waters. This is a much-awaited move considering that in-flight connectivity (IFC), mostly Wi-Fi onboard, is a common phenomenon over international skies. In India, on the other hand, global carriers are required to switch off their IFC equipment when crossing the Indian territory, causing inconvenience to passengers. In fact, switching off mobile devices (or operating them in airplane mode) is mandatory during air travel in India.
Since the notification of the rules in December 2018, the Indian industry has been buzzing with potential opportunities IFC could create for different stakeholders. It will help improve passenger experience and add a new non-core revenue stream in the aviation industry. As per industry estimates, IFC is expected to contribute to $30 billion to airline revenues globally by 2035. The IFC market will also open up additional revenue opportunities for satcom players and telecom service providers, which will offer their services to foreign and domestic airlines.
So far, DoT has issued FMC licences to 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.
Progress on ground
While the stage seems to be set for the launch of IFC services in India, it may take some time before these services are available on board. New equipment will have to be installed in aircraft, which would require them it to stay out of service for a few days.
Since most of the foreign carriers already have the equipment, they will be able to offer on-board internet over Indian skies in three to four months. Their Indian counterparts might take another seven to nine months. It is expected that Indian carriers will start offering IFC services on their international routes first and then on domestic routes.
Currently, Air India is considering providing on-board Wi-Fi on medium- to long-haul international routes to the US, Europe, Southeast Asia and Australia. SpiceJet too is keen to explore the opportunities offered by IFC.
Pricing models and monetisation
As per the FMC Rules, the airlines and service providers are responsible for the determination of user charges/tariffs. Globally, the average tariff for IFC services is in the range of $5-$10 per hour and $15-$20 for a full-day service in long-haul flights.
Given that India is a highly price-sensitive market, which is mostly served by low-cost carriers, it will be interesting to see the commercial business models that the Indian airlines will develop. Clearly, it will be difficult to mirror global pricing trends, especially when Indian citizens are used to consuming data at as low as $0.02 for 1 GB on ground.
For short-haul flights, carriers might have to provide the service for free or provide a limited free session followed by pay per use. In such scenarios, airlines typically increase the airfare to recover the cost of the equipment installed on board. Estimates suggest a hike of around 30 per cent in domestic airfare once IFC services are launched. However, given the price-led hypercompetition in which Indian airlines operate, sustaining such fares would be a challenge.
Alternatively, airlines can explore additional revenue mechanisms such as advertisements, sponsorships, e-commerce partnerships, premium content and corporate offerings to cover their opex.
Telco perspective
Telcos, particularly those that provide satellite connectivity services such as Bharti Airtel and BSNL, are looking at IFC as a niche service, which can open a new revenue stream for them. Reliance Jio, too, with its VSAT (very small aperture terminal) licence, is looking to foray into the IFC space. That said, IFC will never serve as a major revenue generation source for telcos owing to lower volumes involved.
Moreover, the initial costs involved are very high. Industry reports suggest that the installation of equipment in aircraft will cost telcos around Rs 150 million per aircraft. In addition, airlines are expected to demand at least Rs 36 for a call, leaving little margin for telcos. Also, while the annual fee for the FMC licence is just Re 1, the revenue from IFC services will be considered a part of the adjusted gross revenue, which is subject to an 8 per cent licence fee.
The entire IFC proposition will make more sense for telcos if they engage with global carriers that typically fly longer routes. This is because IFC has little significance in short-haul flights, that take less than three hours to reach the destination. Moreover, connectivity is barred during takeoff and landing. Clearly, it does not make a compelling case to spend a few hundred rupees for calling/internet surfing when the same can be done for nominal charges after landing.
Meanwhile, telcos can look at providing monthly packages to consumers, which may include a certain amount of in-flight usage as well.
Challenges
Quality of service (QoS) becomes a key concern when ground-based base stations, which have limited transmitting capability, are used for providing IFC. Communication is prone to interference due to weather conditions, distance and noise. On the other hand, satellites face challenges in seamlessly transmitting IFC services. Satellites typically divide geographical areas into smaller zones when providing broadband connectivity. This requires frequent hand-offs, which can be effectively carried out on ground but when in the air, it increases the level of interference and affects QoS.
Besides, with advanced communications equipment on board, aircraft networks will be susceptible to potential cyberthreats. It is imperative that separate channels are deployed to provide Wi-Fi, so that they do not interfere with aviation communication channels.
On the policy side, the FMC Rules make it mandatory that the FMC gateways/servers be located within India, a condition that various international airlines were seeking to get waived. Further, only Indian satellites or those approved by the Department of Space can be utilised.
Also, the Indian Space Research Organisation (ISRO) is the only entity allowed to provide satellite bandwidth for IFC. This will remove competition, resulting in high bandwidth costs. This will ultimately have an impact on the cost of IFC service provisioning and pricing.
The way forward
India falls along the important international routes, and passengers for long- haul flights often look for on-board Wi-Fi as a basic amenity. The formulation of the FMC rules is thus a welcome move, as it will bring India on a par with its global counterparts, significantly improve passenger experience, enhance tourism and bring in additional revenues for the civil aviation industry. Moreover, it resonates with India’s big digital vision.
With policy and regulatory clarity in place, it would be interesting to see how industry stakeholders collaborate to develop viable monetisation models for IFC services. Globally, these services are being provided by over 30 airlines across 40 jurisdictions. Indian companies planning to foray into this space can take a leaf out of their book to evaluate the business case and likely challenges.
Akanksha Mahajan Marwah
