Throwing Nextel A Curve Ball

BYLINE: By Sue Marek

BODY:
Nextel Communications Inc. has built a loyal fan club of enterprise users who rely on its exclusive Direct Connect offering. But the service may soon lose its status as the only push-to-talk game in town.
Direct Connect, which other carriers have long envied because it has helped Nextel keep churn rates low and average revenue per user high, likely will be challenged later this year by competitors rolling out look-alike initiatives that feature the same push-to-talk capabilities that have attracted high-end business users to Nextel's iDEN network.

The first competitor to step to the plate may be Sprint PCS. Although a spokeswoman for the carrier emphasized that Sprint PCS hasn't officially announced it will offer push-to-talk service, Sprint PCS President Chuck Levine told reporters at the CTIA Wireless 2002 conference last month that once Sprint's CDMA2000 1XRTT network is up and running, the carrier will focus on enhancing services by introducing new feature-rich offerings. It also plans to aggressively pursue the enterprise market by delivering a push-to-talk capability.


Exactly how Sprint PCS will make push-to-talk happen isn't certain, but analysts speculate the company will use technology developed by Tewksbury, Mass.-based startup Winphoria Networks. Steven Kish, Winphoria's director of product management, wouldn't confirm the Sprint PCS deal, but did say that Winphoria has signed a contract with a nationwide carrier.
According to Kish, Winphoria's mobile switching center offers several applications, including one called Global Instant Rendezvous. Although air-interface independent, Kish says when a carrier implements GIR in a 1X environment, it can enable real-time group calling sessions similar to Nextel's Direct Connect service.

Other carriers apparently are pursuing the strategy as well. "Sprint has been the most aggressive as far as making their enterprise strategy clear," says Charles Golvin, senior analyst at Forrester Research. "But AT&T Wireless and Verizon Wireless are also looking at ways to enhance their offerings to enterprises."

Spurring much of this interest was Nextel's announcement in January that it would offer its Direct Connect service to CDMA carriers--outside the United States--using Qualcomm's BREW technology, which offers a push-to-talk service called Qchat. Qualcomm, Nextel and Motorola agreed to market and license the technology, but it will be available only to carriers outside the United States because Nextel has an exclusive license for the technology in this country and isn't likely to give up that competitive advantage. "After the Qualcomm, Motorola and Nextel announcement, we received very strong interest from all the major CDMA carriers in North America," Kish says.

Winphoria's technology isn't the only push-to-talk solution available, either. Spatial Wireless' Portico overlay gateway product also delivers several specialized services, including push-to-talk capability, according to a spokesman for the switching startup. Rich Glew says the company has received considerable interest from U.S. carriers that want compelling applications for their 1X and GPRS networks.

But even if other U.S. wireless operators are successful in their quest for push-to-talk service, analysts doubt that capability alone will be enough to threaten Nextel's strong ties to the enterprise market. "Nextel has done a very good job [there]," says Michael Doherty, senior consultant with Ovum. "It won't be easy for others to crack that."

Doherty adds that unlike consumer subscribers, enterprise users aren't as price sensitive and therefore are not as likely to churn to another carriers just because it offers a less-expensive push-to-talk service. "These guys will pay a premium for these services and Nextel's customer service is good," Doherty says.

Others say that much of Sprint's success with push-to-talk will lie in its ability to win new enterprise subscribers, not in its potential to lure away Nextel enterprise customers. The key is for Sprint to competitively price its service and differentiate its offering from Direct Connect.

Even so, Nextel believes that it has a significant advantage over competitors. "We are clearly the innovator of integrated digital two-way radio communications," says Nextel spokesman Chris Grandis. "We are consistently improving the technology and I think we are way ahead of anybody else. With all our experience as innovators and pioneers, why would people want to go to another carrier?"