U.S. firm ties up with partner for 2013 launch
By Scott Deveau, Financial Post
Canadian air travellers may soon be able to access wireless Internet after federal regulators signed off on a plan by Illinois-based Gogo Inc. to begin offering the service north of the 49th parallel.
Until now, a series of regulatory and infrastructure issues have prevented airlines from offering Internet service in Canada.
Gogo, a leading in-flight wireless provider in the U.S., said Tuesday it intends to build infrastructure in Canada to provide air-to-ground connectivity through its partnership with Ottawa's SkySurf Canada Communications Inc. by the end of 2013.
Whether Canadian carriers will jump aboard its technology remains to be seen.
Gogo has had a limited partnership with Air Canada since 2009 to provide Internet service on two aircraft flying between Canada and California.
Gogo's plan is to concentrate initially on existing Canadian routes operated by its U.S. and Canadian partners, including Delta Air Lines, Alaska Airlines, United Airlines, and others. Those with knowledge of the situation say Gogo hopes to add Canadian partners, and possibly expand its deal with Air Canada.
"Whether it's on a commercial or business aircraft, passengers travelling in Canada can soon experience the same technology that has a proven track record of performance and reliability in the U.S.," said Michael Small, Gogo's chief executive.
Gogo currently provides Internet access to passengers across the U.S. for a fee, ranging from US$1.95 for 15 minutes to upward of US$20 on cross-country flights.
Typically, wireless Internet signals are either transmitted to aircraft from a satellite or accessed from the plane by connecting to transmitters on cell towers on the ground.
Gogo offers only the latter in the U.S. Foreign ownership limits and other regulatory restrictions have prevented it from doing the same here.
That hasn't stopped Gogo from pushing ahead with its plans in Canada, which will come to fruition through its partnership with SkySurf.
In 2009, SkySurf, founded by Ottawa businessman Raed Almasri, bought the rights to provide air-toground Internet service in Canada for $2.1-million during the federal government's spectrum auction. That deal not only provided the groundwork for Gogo's plans, but has been a windfall for Mr. Almasri and his partners.
Under the terms of their agreement, Gogo has agreed to pay SkySurf $3.3-million for the exclusive rights to use SkySurf's air-to-ground licences as a means to get around the foreign-ownership restrictions, according to regulatory filings for Gogo's IPO.
Gogo has also agreed to pay SkySurf $200,000 a month to lease the signals over the course of their 10-year agreement, as well as other monthly payments based on the number of cell sites in Canada and the number of domestic commercial aircraft on which its service is provided, the filings state.
Industry Canada on Tuesday issued Gogo a subordinate licence for air-to-ground radio frequency spectrum that will allow Gogo to serve passengers on commercial and business aircraft flying over Canada.
Transport Canada is also in the midst of reviewing its policy on allowing portable electronic devices onboard aircraft based on experiences of Air Canada's partnership with Gogo and the U.S. experience.
Ben Smith, Air Canada's chief commercial officer, said on a conference call earlier this month the airline was studying its options for inflight Internet.
"It would be our preference to have one solution for North America and international as opposed to two and what's available today would not give us the perfect solution," he said.
Gogo intends to start rolling out a satellite-based service in early 2013 to provide Internet access to aircraft flying across the ocean or other bodies of water.
Peter Fitzpatrick, a spokesman for Air Canada, said, "We still have the partnership and it is still on the two planes flying to California. At this point, though, the technology is evolving rapidly so we are still assessing the technology so there have been no final decisions."
WestJet Airlines Ltd. said Gogo was one of the technologies it is considering and it hopes to make a decision on a provider by year-end.
"[We're] kicking the tires on a bunch of different technologies right now," said Robert Palmer, a WestJet spokesman.
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