Gogo celebrates growth, but lawsuit claims it may be too much

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G
roundhog month has been so-so for Gogo.

The good news is that the Broomfield-based provider of in-flight Internet systems this month topped the 2,000 mark for installations in business aircraft. The bad news is that a class action lawsuit claiming the company is violating antitrust rules is headed for trial.

Gogo makes systems that provide Internet access and entertainment services on airplanes. While the company is best known for its service on commercial airlines, in recent years its business aviation group, Aircell, has enjoyed rapid growth among corporate and business aircraft operators.

The unit has been so successful, in fact, that Aircell is planning to move to a new 112,300-square-foot facility in Broomfield’s Interlocken Advanced Technology Park later this year. The new headquarters will more than double the company’s current space. Aircell has nearly 200 employees and the company expects to hire more in the coming years.

The company’s Gogo Biz system provides wireless Internet access above 10,000 feet in the continental U.S. and portions of Alaska. According to the firm, Aircell serves more than 6,000 business aircraft operators worldwide.

aircell-logo"The business aviation market's passion for the service continues to exceed our expectations," says John Wade, Aircell's Executive Vice President and General Manager.

Meanwhile, some air travelers are complaining that Gogo’s success may be a little too good.

In 2012, a group of airline passengers filed a class action suit against the company, claiming that Gogo was violating antitrust regulations with an 85 percent share of the in-flight Internet provision market. The suit alleged the company’s long-term contracts with commercial airlines make it too difficult for airlines to switch to lower cost providers. The plaintiffs contended the contracts were overly-restrictive and constituted an illegal restraint on trade.

Last April, a federal judge dismissed the case, but left the door open to try again if new facts could be presented. An amended suit was filed and this time, the same judge, U.S. District Judge Edward Chen, ruled late last month that the case could move ahead to trial.

gogo-logoIn the original suit, passengers complained that Row44, a Gogo competitor, costs as little as $5 for an entire flight of Internet service, yet airlines can’t switch from Gogo because 10-year contracts locked them in. Gogo pricing varies by flight, but a 24-hour pass purchased before takeoff is $14. The suit also argued that Gogo’s Internet technology is inferior because it relies on ground-to-air tower transmission rather than the satellite service offered by Row44.

Judge Chen, however, sided with Gogo. The company argued it does not have a corner on the market because it covers only 16 percent of all U.S. airplanes, and airlines that did not yet have Internet service were free to sign up with a competing provider. The contracts are sold on an airplane-by-airplane basis, and not across entire airlines.

This time around, though, the judge ruled the plaintiffs have demonstrated enough of their case to settle the matter in a trial. According to the ruling, “even if the 85% figure is not correct, Plaintiffs allege with specificity other major airlines — including American, Delta, and US Air — whose fleets in their entirety or near entirety are or were locked up by Gogo’s contract.”

Judge Chen also said that in the new amended suit, the plaintiffs this time have produced copies of contracts, press releases and other evidence to bolster their case. The ruling means that Gogo will have to respond to the allegations in a trial.

Despite the current haggling over market share, delivery of Internet service in the sky remains an expensive proposition for all entrants. As explained by Stacey Higginbotham in an article on the GigaOM technology news website, “getting a mobile connection in a metal tube flying at a speed of 500 miles per hour is actually pretty freaking phenomenal.”

The most significant cost, she notes, is the cost of delivering data over the network. There are basically just two delivery methods — ground-based networks and satellite networks. Neither is cheap.

Gogo built its own ground ground-to-air tower transmission network that delivers a signal to planes above 10,000 feet. Estimates put Gogo’s cost at about 20 cents to deliver a megabyte of data, which works out to $200 per gigabyte. As a comparison, AT&T and Verizon charge about $10 per gigabyte for wireless data. Today, Gogo also uses satellite transmission. That’s not exactly a bargain, either.

Satellites deliver signals in several different frequency bands. Row 44 and Panasonic Avionics buy satellite capacity in the “Ku-Band,” which is also estimated to cost about 20 cents a megabyte to deliver.

Relief, however, may be on the horizon. By next year, providers are hoping to deliver service in the “Ka-Band,” via a new satellite that could bring connectivity costs down to just 2 or 3 cents per megabyte.

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