In what may be the beginning of a trend, BellSouth Wireless Data L.P. and Paging Network Inc.
entered into a strategic alliance last week under which PageNet will resell BellSouth’s Interactive Paging Service,
effective in May.
According to the agreement, PageNet will be the primary distributor of both BellSouth’s service
and the Research In Motion Ltd. Inter@ctive 950 Pager, which the companies will co-brand.
It’s a classic “If
you can’t beat ’em, join ’em” strategy for both sides. BellSouth entered the two-way paging market positioning its
Mobitex data network as a superior option to paging technology. But it could never hope to match PageNet’s dominant
distribution presence in the messaging industry. For its part, PageNet needed an alternative technology option to meet
the needs of potential customers that its soon-to-launch ReFLEX two-way network can’t fill.
Jack Frazee Jr.,
PageNet president, chairman and chief executive officer, strongly stated that reselling another’s two-way paging
technology in no way diminishes the company’s faith and commitment to its own ReFLEX-based two-way network,
expected to become commercially operational in the second quarter.
“This announcement will not affect one
iota the launching of our own two-way network. It is on time and on schedule,” he said. Full interactive two-way
paging on that network is not expected until the third quarter.
Instead, Frazee said the agreement was about offering
a more diverse portfolio of services to customers, as end users demand more services tailored to their specific
needs.
“It is absolutely ludicrous to think that any one wireless solution is the answer to everyone’s
needs,” he said. “That’s just not going to fly.”
The main point of differentiation between the two
solutions is latency vs. coverage.
The BellSouth Interactive Paging Service uses a packet data network capable of
transmitting data in real-time, what Frazee called a “high-speed, low-latency” solution.
ReFLEX
technology-based networks, like the two-way network PageNet is building, are not optimized for real-time
transmission. ReFLEX is a store-and-forward technology. This limitation could pose as a stumbling block when
negotiating deals with people who require greater message length at higher speeds. Without an option to meet these
demands, potential customers could walk.
“It comes down to the customers we own-we want to keep
them,” said Scott Baradell, PageNet director of corporate communications.
As such, PageNet’s Advanced
Wireless Integration Group is expected to play a key role in distributing the BellSouth service.
“We’re
focusing this product more with heavy users and customers who we’re building custom software for,” he said,
referring to the AWIG unit. “We think customers who are going to be the heavy users-those who want to forward
all their desktop e-mail to their device-may be better off with the BellSouth product.”
Meanwhile, people who
require better coverage and broadcast capabilities likely will prefer the PageNet solution. ReFLEX networks are
cheaper to build than packet data networks, which allows PageNet to expand its network in ways BellSouth won’t.
Paging technology also allows for one message to be broadcast to multiple devices at once.
Baradell also said some
customers may have certain device preferences. PageNet uses the flip-top screen PageWriter 2000 from Motorola Inc.
while BellSouth uses the jog-dial flat screen of the Inter@ctive 950.
“As we move forward and more devices
are built on these network platforms, you’ll see even further differentiation in the types of applications run on those
networks,” Baradell added.
PageNet’s direct sales force and certain resellers targeting corporate accounts also
will distribute the BellSouth solution.
Beyond distribution, the agreement calls for joint product development and
marketing between the two companies. Of particular interest is Frazee’s assertion that PageNet will work with
BellSouth during the next several months to deliver PageNet content services over the BellSouth network and on RIM
devices.
“In general, our big-picture strategy in investing all this time and money in building our content
engine is that what we’ve built doesn’t need to be restricted to our own network,” Baradell said. “We are
interested in other companies reselling our information services down the line.”
However, PageNet has yet to
launch the service itself yet. Still, the mere intention confirms PageNet’s dedication to its stated goal to be more of a
services provider than a network provider, a move praised by analysts.
“PageNet has to be indifferent to
whether they put customers on their own network or someone else’s,” said Darryl Sterling, wireless analyst at The
Yankee Group. “The network will become less and less of an issue. It’s the information flowing through the
network that will be important.”
For its part, BellSouth gains much-needed distribution power. When the
company entered the two-way paging market last year, it placed print ads directly attacking the only other two-way
provider in the market at that time-SkyTel Communications Inc. Several carriers harshly criticized that tactic as being,
at best, in bad taste.
Now BellSouth partnering is with a paging carrier that will use essentially the same technology
and same device as SkyTel. Why?
“They don’t have the expertise selling the product nor the distribution
points,” Sterling said.
BellSouth will not discuss its subscriber numbers for the Interactive Paging Service, but
Bill Lenahan, the company’s president and chief executive officer, said the subscribers gained to date have surpassed
his initial projections. Some analysts have estimated the company has about 15,000 users on the service.
Aside from
the gains made individually, Sterling said the agreement allows the two companies to present a stronger defense of the
messaging industry against the impending encroachment of their territory by next-generation voice
technologies.
“This shows messaging carriers are presenting a unified front to combat 3G,” Sterling
said. “They’re trying to get there before the voice guys do … The business model is going to be far more
diversified than the old days and it’s going to lower the risk.”
