Airbus Takes Sides in Net Dogfight

Baldwin Louie — Thu, 14 Jun 2001 18:00:00 -0400

UPDATE Just a day after Boeing sewed up the U.S. airline market for its in-flight broadband Internet service, Airbus has thrown its weight and about $44 million behind a rival service.

In the race to deliver airborne connectivity, the competitive field has narrowed to two seemingly mismatched players: aerospace giant Boeing and Tenzing, a privately held Seattle-based startup with a staff of 150. In London, Boeing's archrival, Airbus, said Thursday that it is taking a 30 percent equity stake in Tenzing under a deal concluded earlier this month that values the company at $148 million. As part of the deal, the European aircraft manufacturer has selected Tenzing's service as the "preferred e-mail and Web-content software application on Airbus aircraft." Airbus will contract directly with Tenzing's hardware suppliers to equip its aircraft.

"Tenzing's will be the preferred e-mail and Internet access system that will be factory fitted to Airbus planes during manufacture in Toulouse," said John Wade, Tenzing's executive VP of strategic development. Wade added that additional strategic partners will be announced later.

Airbus's move, announced just ahead of the Paris Air Show, sharpens the already intense rivalry between the U.S. and European aircraft manufacturing giants. It also ignites a fascinating global race to provide airborne Internet access, with Boeing set to dominate the U.S. and Tenzing already gaining momentum everywhere else.

On Wednesday in Washington, Boeing announced a joint venture with the three major U.S. airlines – American, Delta and United – to launch its service, called Connexion. The main obstacle to Boeing's success is that the planned rollout for its high-bandwidth service is slow, especially overseas. The initial launch of Connexion, covering only the continental U.S., won't begin until the second half of next year and will take as many as five years for full-fleet deployment. Because of delays in leasing the necessary satellite capacity and getting transmission licenses, trans-Atlantic service won't be available until 2003. Service over the Pacific is perhaps three years away.

By contrast, while Tenzing said it plans to deliver broadband access in approximately the same time frame, its narrowband access service is up and running right now. As a result, some non-U.S. airlines unwilling to wait as many as three years for Boeing are going with the more nimble startup. Air Canada has just completed a successful six-month trial of Tenzing's service aboard five of its aircraft, all Boeing 767 jets. Cathay Pacific and Singapore Airlines have committed to full-fleet rollouts, starting in July. Virgin will begin a full-fleet deployment and Scandinavian airline SAS will start its trial in the fourth quarter.

Tenzing sees e-mail as the killer app, not Web surfing. For the next two years, business travelers to Asia and Europe will have the option to choose an airline with e-mail access, and it won't be the major U.S. airlines. It will be Tenzing's customers.

The Tenzing narrowband service is currently fully operational on one Singapore Airlines jumbo jet, a Boeing 747, and is free to passengers for now. In January 2002, Tenzing will begin charging $9.95 for 24 hours of access to e-mail and Web content. (Boeing said its broadband service will be priced at about $20 per hour.)

Tenzing's narrowband connection from aircraft to ground is a thin one, reaching only slow dialup speeds ranging from 2400 to 9600bps. However, because data to be transmitted is aggregated on servers onboard the aircraft and sent out in bursts, users don't have to wait while the data downloads. Once an e-mail is sent, for example, it will sit on the aircraft server until the next transmission, no more than 15 minutes. Most of the available Web content – targeted to business travelers – is cached in the servers before takeoff with only brief news and sports updates periodically uploaded from the ground.

Tenzing also is working with ISPs, including the iPass global remote-access network and Telia of Scandinavia, to provide roaming access to passengers in airports as well as onboard the aircraft. In conjunction with Telia, SAS is setting up a trial in the fourth quarter of this year that will give wireless access to Tenzing's service both on board its planes and in its airports.

Boeing dismisses the Tenzing narrowband solution and insists on the need for a robust, tested service powerful enough for business needs. "I'm concerned about Tenzing as a competitor," said Scott Carson, president of Boeing's Connexion unit. "I'm more concerned about an inferior service."

Airbus' investment "will create deeper pockets," Carson said, "but over the long haul Tenzing won't be competitive. If they convert to a broadband system, they'll have development time just like us. And we have first-mover advantage."

Tenzing, though, sees first-mover advantage in getting into the market now, not next year.

"Tenzing can do everything Boeing can do," said Alex McGowan, Tenzing's senior director of marketing. He said there'll be a clear migration path for airline customers to upgrade to broadband when it becomes available. "In the meantime, we offer airlines the opportunity to start now."

Tenzing had relocated from Sydney to Seattle in June 1999, in part to be close to Boeing as the leader of the aviation industry. At the end of this summer, Boeing is moving its headquarters from Seattle to Chicago. But if passenger reaction to Tenzing's interim narrowband service is positive, the leading Internet-in-the-sky service could turn out to be Seattle-based after all.

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Airbus Takes Sides in Net Dogfight