Nextel Communications Inc. is testing nationwide pricing plans that fall in line with high-end one-rate plans offered by national mobile phone competitors.
Analysts say the company quietly is rolling out the plans, which eliminate long-distance fees, to test the market’s demand for nationwide pricing.
“This is the first time Nextel has had nationwide pricing,” said Chris Larsen, senior wireless analyst with Prudential Securities Inc. in New York. “This isn’t necessarily something it will stick with. There is some indication customers are interested in it.”
Nextel says the national rate plans are in line with the earlier introduction of the Motorola i1000 handset, a sleek clam-shell shaped handset integrating cellular service and dispatch service, designed to attract the high-end cellular user.
Nextel President Tim Donahue at a recent SoundView Technology analyst conference indicated October was the company’s strongest month ever for subscriber additions, and growth was fueled by the popularity of the i1000 handset.
For the next year, the company plans to focus on the business segment, using distributors such as Office Depot, Home Depot and Staples. SoundView indicated Nextel’s Office Depot channel has been doubling subscribers sequentially in the last few months.
“Nextel, in an effort to mimic the other so-called consumer-oriented carriers, has followed suit with not only smaller phones, but also pricing plans that would be appealing to heavy-usage customers,” said Larry Swasey, wireless analyst with Allied Business Intelligence in Oyster Bay, N.Y. “For a company that supposedly only had a niche market, it seems to be proving to everyone that it can play in all wireless arenas.”
Nextel’s move is the latest in its pricing game with nationwide mobile phone operators AT&T Wireless Services Inc. and Sprint Spectrum L.P. The enhanced specialized mobile radio operator was the first to eliminate roaming within its own footprint. Sprint PCS followed suit, offering home-rate calling in its markets. In May, AT&T Wireless introduced aggressive plans that eliminate roaming and long-distance charges nationwide. Sprint PCS in October began offering three new all-inclusive national pricing plans that eliminate roaming and long-distance fees on its network nationwide. Now Nextel is offering two national pricing plans: one for $90 that includes 500 cellular minutes and 150 dispatch minutes and another for $130 that includes 900 minutes and 150 dispatch minutes.
Some analysts suspect Nextel is capping the dispatch minutes to 150 because customers have been treating the service as an unlimited resource. Average minutes of use for dispatch is around 220 minutes, said Tim O’Neil of SoundView.
“The actual usage of the feature has surprised everyone, including the company, which is desperately trying to keep up with demand,” he said. “People were treating it as an unlimited capacity. Nextel is trying to find out what the price sensitivity for this market segment is, as well as trying to put some kind of controls in place for the utilization of the network.”
“Nextel may be trying to shape the typical usage of the system, and a cap would likely produce a loss of some of the non-essential calls over their own radio system,” said Swasey.
Nextel denies any capacity issues associated with the dispatch service, saying some of its regional plans cap dispatch minutes as well.
