A green oasis in the bleak landscape of data is the availability of government charts for cheap on portables like the iPad (ForeFlight, WingX) or for free on the internet (RunwayFinder, SkyVector, Airnav). The fuel for this micro industry has been digital charts and other products free for the downloading from the FAA’s Aeronautical Navigational Products Directorate, a.k.a., Aeronav.
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But after April 5, 2012, the products will cease to be free. Initial reports were that this decision stemmed from concerns about safety. We spoke at length with Abigail Smith, Manager of Business Development for Aeronav, concerning this policy change. While Aeronav has concerns about digital representations altering their charts—such as the stitched-together, seamless charts that can obscure or remove information—it’s really about the money.
Aeronav is funded federally on a cost-reimburse basis. They must recover the costs attributed to the actual production and distribution of their products. Smith tells us that for digital products, that would include the databases and software to create and maintain the charts, compilation, production equivalent to printing (such as rendering the chart’s image) and distribution, which would include the servers for putting the data on the internet.
“Because we’re legislated, we can’t collect more money than our cost,” says Smith. “We’re committed to the most affordable product line for the end user. But if revenue diminishes, the product line diminishes.” Smith went on to say that Aeronav is determined not to create a situation where there would be “only private sources” for charts. By this we understand her to mean only one or two private sources, as individuals won’t be able to buy any products directly from Aeronav, digital or paper, after April 2012. A chart source monopoly is exactly what happened when NOAA made a similar policy change with their charts, and the results were a bit of a fiasco in the marine industry.
By press time, Aeronav wasn’t able to give us hard numbers on how much money they need to recoup. We’ve heard estimates as high as $50 million—larger than the entire aviation app industry combined. Aeronav neither confirmed nor denied that number when we asked them, answering only that they wanted to “remain compatible with the market.”
After April 5, 2012, anyone wanting digital versions of Aeronav charts will have to enter an agreement similar to a paper chart sales agent. At meeting set for December 13 of this year, Aeronav will reveal their best guess at what the digital product agreement and the pricing structure will look like, with “a rough order of magnitude” on the actual price. They will also set the standards a digital chart agent must follow to ensure the “integrity of the product.” This won’t mean the elimination of something like stitched-together charts, but it will probably mandate some changes in apps and Websites to ensure all the information on the paper chart is accessible.
The proposed structure will be a licensing deal where, say, zero to 500 users would merit a fee of $X, and 501-1000 users might be .95 times that $X. Part of the uncertainty in the price of “X” is that it’s uncertain what X will represent. Is that per user of all potential products? Or does one sectional cost X, but one sectional and a region of approach charts cost 2X? Either system would have winners and losers. But the record keeping for even a simple plan would be enormous, and even though the onus would fall on the vendor to handle their subscriptions, Aeronav would have to audit the process to prevent cheating. This raises expenses on both sides of the equation, making it even more difficult for a vendor to maintain a profit margin while still charging a price the app market will sustain and making Aeronav’s bar higher for recouped expenses.
The burden will be disproportionately high on the smallest vendors, who will pay the highest per-use royalty while simultaneously trying to build a customer base willing to pay a premium price. Mark Spenser of Avilution is one of the few makers of aviation apps for the Android platform. His users pay $4.95/month for charts on his app. “When I put it out, it was $10. I didn’t sell many. Finally, one guy wrote this long drawn-out e-mail saying this was highway robbery,” he told us. When the price dropped, subscriptions took off. While Aeronav’s Smith has a point that people are getting for cheap charts they used to pay for, the reality is that the consumer has repeatedly refused to pay the same for digital as they once paid for paper. So the fallout of this new policy may be strangling the low-end of the market where innovation has been strongest.
For those who do pay up, they’re likely to mitigate costs by going back to buying the minimum coverage they need, or look at what else they can get for the money. Tyson Weihs, president of ForeFlight, says, “Let’s suppose we all have to have raise prices $100 to $150. We’re now competing with Jeppesen. None of us have the resources of a $600 million company.”
Of course, Jepp could make a case that the app makers have gotten a free ride, basically reselling the government’s cartography work. The underlying data to make all these charts, which Jeppesen uses, will still be free. Weihs says ForeFlight is exploring using that data to make their own kind of enroute charts, but approach charts are out of the question. While some have speculated that companies like Jeppesen, or the bigger paper chart agents, influenced the FAA here, our investigation hasn’t been able to turn up any evidence.
The smallest vendors have another problem: The billing structure of systems like Google Checkout don’t allow them to raise the price unless the subscriber cancels and resubscribes. Avilution, a one-man company, sold those $4.95 subscriptions through Google and can’t simply raise the price.
Then, of course, there are the sites that are currently free. We spoke with Dave Parsons of RunwayFinder, who has already had a tumultuous road dealing with a patent-infringement lawsuit with FlightPrep. He says that even a few thousand dollars a year in additional burden would force him to shut down. Ironically, RunwayFinder gets about 1300 visits a month from computers within the FAA network. Lockheed Martin also uses his site. Perhaps they’ll switch to using a flight planning Website Aeronav says they will offer to pilots for free—but with no downloads of the charts.
In October of 2010, the FAA cut costs on the paper side by requiring every $5000/year (wholesale) in sales to maintain a contract. The move saved about $3 million. That’s an ominous precedent if the management of digital royalties gets difficult and they go looking for a way to trim the costs.
Our conversations with Smith left us believing she and her group genuinely want to corroboratively build a system that works for all. They are also developing products that could provide better source material for better apps. But when we asked what happens if the minimum dollars the FAA needs exceeds the maximum dollars the industry can bear, she couldn’t tell us where that difference might get made up.
Putting all this together, there’s little doubt in our minds that April 2012 will mark a sea change in our paperless cockpits. The days of $20 U.S. coverage will end. Actually, it’s already begun. In October of this year, Aeronav changed their policy to only publish the new (still free) digital products on the Website 24 hours before they become effective. Some app makers have switched to buying the products on DVD so they had time to process the data. Finding the players and getting income may have figured into that change. But others just adapted to crank out the updates in one day. Some admitting to publishing old data for a day or two until they could get everything up to date.
