How We Got Stuck With Gogo’s Terrible In-flight Wi-Fi
Sam Grobart has a very good piece in Bloomberg explaining how Gogo became the largest in-flight internet provider in the U.S., and how it earned $409 million in 2014 despite, well, everyone complaining how bad the service is. The first answer is that Gogo was a “pioneer” that got its technology onto planes first:
Since pioneering the in-flight Internet business, Gogo has dominated, commanding about 80 percent of the market. And as often happens with near monopolies, Gogo has become a name people love to hate. “So, Gogo is officially a joke at this point, right?” is the title of a well-commented-on thread on the road warrior site FlyerTalk. “They’ve got a monopoly, and they just don’t care,” says pharmaceutical executive and frequent flyer Keith Lockwood. “Once you have it, it’s hard not to have it.”
But as Grobart reveals, Gogo didn’t gain what is essentially a monopoly by being the only company willing to provide a service. There are actually other companies out there that have the capabilities to provide faster service at a lower cost. Why haven’t these companies forced Gogo out of the market, or gotten Gogo to provide better service to remain competitive? Well:
Gogo’s two main competitors, ViaSat and GEE, use satellites exclusively for customers such as JetBlue and Southwest. Both services have faster connections and lower prices, yet neither has dented Gogo’s dominance. That’s mainly because Gogo did a good job early on of locking up airlines into decade-long contracts. Gogo will install and maintain the equipment across a fleet for 10 years and share the Wi-Fi fees with the airline. As soon as the contracts are signed, hardware lock-in takes hold. Gogo (and ViaSat and GEE) equipment is proprietary, so switching providers means switching servers and antennas and everything else. “Once something is installed on the plane, it’s very hard to change it out,” Macquarie’s De Gasperi says. “For someone to install something and then decide a few years down the line, ‘You know what? I don’t really like it anymore,’ that would involve probably days or a week of that aircraft not flying. Aircraft lose money when they’re on the ground.”
That doesn’t mean Gogo will hold onto the market forever—companies like ViaSat are starting to sign deals to airlines like Virgin America. And Gogo is stepping up its game and says its planning on rolling out faster service powered by satellite in the near future. Our bit of advice: If you do find yourself having to use Gogo on a flight, try pre-paying for your service in advance directly on the Gogo site: it’s cheaper.