FORTUNE Small Business

Wi-Fly

Boeing couldn't make a business out of in-flight Internet. AirCell bets it can.

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Should you be doing a lot more business at 35,000 feet in 2008, you'll have Jack Blumenstein to thank. The CEO of Denver-based AirCell has inked deals with American Airlines (Charts, Fortune 500) and Virgin America to bring wireless Internet access to their aircraft, starting in the first half of 2008. "When people are in that cocoon, they're cut off," Blumenstein says. "This gives them control of their time." His consumer research says that 75% of passengers with laptops would use onboard Internet every time they fly. The airline pays $100,000 for the installation, the passenger pays $10 per flight, and Blumenstein thinks he can bring in $1 billion a year.

It's a proposition some giants of the industry couldn't make work. Connexion by Boeing, the joint wireless Internet venture between Boeing (Charts, Fortune 500), American, Delta (Charts, Fortune 500), and United, folded in 2006 after onboard equipment proved too expensive and heavy - as much as $800,000 and 1,000 pounds. Few passengers knew about the service, let alone wanted to fork out as much as $30 to get online. "Boeing failed to create demand," says Henry Harteveldt, a travel analyst at Forrester Research.

What makes AirCell different? The company's Internet equipment is significantly lighter (at 150 pounds) and less expensive than Boeing's technology. Unlike Connexion, which used satellites, AirCell's engineers use cellphone towers on the ground to create a roaming hot spot in the air. AirCell worked with equipment maker Qualcomm (Charts, Fortune 500) to fine-tune existing cellphone radios and mount them atop existing towers. Because there's nothing up there to get in the way of the signals, AirCell will use just 100 cell towers to cover the continental U.S.

The service required some serious political finagling on top of the technical know-how. AirCell needed a license from the U.S. Federal Communications Commission to operate in a key slice of air-to-ground spectrum - a slice that Verizon (Charts, Fortune 500)'s Airfone already uses for its phones on the seatbacks of most airplanes.

Blumenstein had to spend two years arguing with the FCC that most of Airfone's competitors had gone out of business, and the spectrum needed to be recalled for bigger and better broadband. (It worked, and AirCell won an auction for the spectrum in 2006 with a $31 million bid.)

There has been no Wi-Fi on international flights since Connexion failed. AirCell aims to expand into Mexico and Canada by 2009. It won't have the world to itself. Row 44, based in Westlake Village, Calif., will offer Wi-Fi using satellite technology on Alaska Airlines in spring 2008.  To top of page

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