Elon Musk, Jeff Bezos and the UK’s Fight for Your In-Flight Wi-Fi


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Competition is heating up in the satellite industry with the arrival of deep-pocketed new entrants like billionaires Elon Musk and Jeff Bezos. Yet British antitrust authorities are wary of allowing a transatlantic merger of two of the established operators. Thwarting consolidation in a sector attracting a huge influx of investment looks hard to justify.

Inmarsat, owned by a consortium of funds including Apax Partners LLP, agreed to be bought by Viasat Inc. in November 2021 for $4 billion of cash and stock. An initial probe by the UK Competition & Markets Authority found concerns about the market for inflight satellite Wi-Fi. In October, it concluded there was sufficient risk to Europe’s aviation sector to trigger a deeper investigation.

To stop the transaction, the CMA must now establish that the tie-up is more likely than not to cause a “substantial” lessening of competition. This is a high bar.

The preliminary assessment was that the incumbent players – the likes of Intelsat, Panasonic Holdings Corp. and Anuvu – don’t threaten Viasat and Inmarsat very aggressively. That’s based in part on comments received from the aviation sector, the customer base with the most at stake.

As for the new entrants — not just Musk, but also OneWeb, the UK satellite operator that’s joining forces with Paris-listed Eutelsat Communications — the worry is that they won’t be a strong competitive force for a while. Starlink, part of Musk’s Space Exploration Technologies Corp. venture, already has thousands of satellites in orbit and is using them to offer Wi-Fi to households with poor terrestrial connectivity. But its inflight Wi-Fi business remains in its relative infancy and currently has only a handful of customers.

The nightmare scenario is that years could pass before these companies are significantly adding to competition. An enlarged Viasat could hoover up market share in the meantime. Once done, the cost of switching Wi-Fi provider would deter airlines from changing to Starlink or anyone else, so the argument goes.

Inmarsat and Viasat clearly haven’t helped themselves. The CMA cites internal communications apparently downplaying the competitive threats – a view the merging parties told the agency they no longer hold as the landscape has changed. Embarrassing.

Of course, trustbusters should be especially skeptical of what incumbents say about new entrants. Expected competition is a risky reason for approving problematic deals, especially in technology. The snag is it’s unclear whether the current competitive dynamics are quite as fragile as the CMA’s appraisal suggests. Contracts are being won across the industry in Europe. Having signed up Air France in 2021, Intelsat emerged from bankruptcy last year with its debts restructured. It could now exert still more pressure. Anuvu recently signed up with Turkish Airlines. And Panasonic continues to benefit from existing strong relationships providing inflight entertainment.

Moreover, the threat from the new entrants is looking increasingly credible. True, Starlink still needs regulatory clearance to turn contracts with Hawaiian Airlines and Latvia’s airBaltic into a fully functioning service. It’s not up and running on large aircraft flying from busy airports. But it’s already established on smaller planes flown by regional US carrier JSX.

The CMA highlights the advantage that incumbents have when it comes to getting their kit installed on aircraft when they’re being built, which carries obvious efficiencies. Still, gatecrashers can always break into the market by retrofitting customers’ existing fleets.

It’s not unusual for the CMA to set out a damaging assessment of a deal’s impact when it’s justifying an in-depth probe. Such transactions can end up being cleared on the second look. If the CMA’s objections stand on this occasion, killing the tie-up will be a reminder that actual, not potential, competition is what really counts.

More From Bloomberg Opinion:

• Microsoft Deal Is a Tough Target for Trustbusters: Chris Hughes 

• The Ukraine War Is Still Low-Tech — for Now: Leonid Bershidsky

• Boeing and Airbus Shouldn’t Dismiss a China Rival: Thomas Black

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. Previously, he worked for Reuters Breakingviews, the Financial Times and the Independent newspaper.

More stories like this are available on bloomberg.com/opinion



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