How do you want your bandwidth, metered or unlimited? For many customers the natural answer is to choose unlimited; who wants to be counting bits and bytes anyways. For passengers flying on one of the planes fitted with Panasonic’s connectivity solution that may soon no longer be a choice. The company says that it is aggressively moving towards a metered pricing approach “anywhere we’re the retailer and making the decisions.”
Rather than buying in for a block of time customers will now be buying a block of data. Panasonic’s VP for Global Communications Services David Bruner believes that this is the best solution moving forward, or at least the option which is most “fair” to all users; that word was used repeatedly during our conversation.
We had a lot of unfairness in our system. [Two passengers] are paying the same amount and one is getting radically more service than the other. … In the past the 80 Mb customer was subsidizing the 400Mb customer and that’s not right.
As the conversation progressed Bruner opened up a bit more on the topic, suggesting that take rates have not changed (though specific details on that were not available) and that the airlines Panasonic is working with on this front are not keen on the changes, “It was our idea. [Air Berlin] was not thrilled about it.” So why make the change? Like most stories it all comes back to the economics of the situation.
Bruner has suggested in a few different conversations recently that the business model around in-flight connectivity is an irrational one. Speaking to the change in billing plan he acknowledges that one of the factors is budgeting for consumption on board, “When you look at usage, however much they want to consume on the aircraft we can make sure we’ve got enough [capacity] to cover that because you have a rational model then.”
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The current megabyte packages are not the final step. Bruner admits that the company is still in the very early stages of implementing the new plans and trying out different price points and service levels:
Whatever we’re doing is probably not the sweet spot. A lot of places we go people want something in a “5” range, whether it is 5 dollars, 5 euros or something else. And they want a certain amount of megabytes which match that. It is not about the megabytes, the passenger is not thinking about that. It is a number I can understand to pay for some usage. How they feel about that afterwards is ‘What did I use the megabytes for and did I get value for my money?’ So we’re trying to do things right now in 5, 10 and something between 15 and 20.
Monthly subscriptions plans are also in the works, spanning multiple airlines where Panasonic provides the underlying service. Bruner envisions customers buying buckets of bytes and being able to use them on any flight his company’s systems power. The initial target audience for such a plan is short haul service in Europe, both because of the carriers where Panasonic’s kit is installed and the shorter stage lengths, “You got a lot of people who take a lot of very short trips but you hardly use any megabytes per trip. So you want to just buy a bucket of megabytes.” No word on when that will happen, but it is in the works.
To the point Bruner raised about trying to match customer expectation to pricing and making sure they feel like they got value for the money, that remains a hard nut to crack, especially with metered plans. I’m sure it works out OK some days for some users, but when the results show up on social media outlets the feeling is typically less positive.
Just paid $15 for 10MB of Internet (or $5 for 3). Kinda regretting it already.
— Jonathan Khoo (@jonk) April 19, 2015
Somehow my usage jumped to 9.5 MB even though I had background app refresh turned off. Must be mail? Dammit. Ttyl!
— Jonathan Khoo (@jonk) April 19, 2015
It will be interesting to see if Panasonic can continue to drive adoption and increase take rates – the necessary steps for in-flight connectivity services to survive and thrive – with the commodity approach, especially when consumers have no idea what the commodity really is or should cost. Bruner does acknowledge that figuring out what customers actually want – compared to what they say – is an interesting challenge, particularly in an industry which is evolving so rapidly. “This is a morphing market and we’re trying to figure out what passengers want, what’s affordable to give them and where those two meet.”
As to the overall idea of fairness, I suppose time-based plans are probably unfair by some measures. Then again, customers are used to such unfairness on planes. I’m quite certain that the two guys sitting next to me en route to Tokyo right now paid a different price than I did for the flight and we’re getting the same service. That’s unfair, right?
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