Nextel Communications Inc. continues to dominate the walkie-talkie space and is not expected to relinquish that lead for some time, despite recent attempts by Verizon Wireless, Sprint PCS and Alltel Corp. to garner some of the push-to-talk pie. Nextel reported more than 13.3 million total customers all owning handsets with PTT capabilities. About 90 percent of its customer base uses the walkie-talkie service to some extent, representing 12 million active PTT customers. Those results exclude Nextel affiliate Nextel Partners Inc., which has reported similar usage levels from its 1.3 million subscriber base.
By comparison, only Alltel, which launched its Touch2Talk walkie-talkie service earlier this year, actually reported recent PTT subscriber results, noting it had signed up approximately 50,000 users to its service by the end of the first quarter.
Verizon Wireless said it does not release subscriber results for its Push to Talk offering, citing competitive concerns, though the carrier did report at the end of third-quarter 2003, it had signed up more than 100,000 subscribers to its service. UBS Warburg noted that in a meeting with Verizon Wireless late last year, the carrier indicated that a little more than half of its customers who use its Push to Talk service were new to the technology while the other half were previous PTT users.
Sprint PCS also said it does not break out subscriber results for its Ready Link service, but did report that 4 percent of its gross customer additions during the first quarter were using the service, which would translate into roughly 72,000 customers. Similar to its Vision data service, Sprint PCS provides new customers with two free months of Ready Link service, after which they can continue to use the offering for a monthly charge.
Nextel’s confidence in its service was reiterated during the recent Cellular Telecommunications & Internet Association show in Atlanta earlier this year when Nextel President and Chief Executive Officer Tim Donahue questioned whether there really was any competition for the carrier’s iDEN-based service.
“We do have competition?” Donahue said in response to a question by CTIA President and CEO Steve Largent during a keynote panel discussion. “You could have fooled me.”
Donahue’s bravado is backed by consumer research that shows that while interest in competing services from Verizon Wireless and Sprint PCS increased last year following their respective launches, the interest has since subsided.
Industry research firm Compete Inc. reported that the number of potential Verizon Wireless customers evaluating PTT products and services online spiked last September at more than 240,000 consumers, but dropped to around 55,000 consumer inquiries last month. Sprint PCS has seen a smaller erosion in interest as its numbers spiked last December at more than 123,000 consumer inquiries for PTT products and services before falling to just more than 115,000 consumer inquiries last month.
In addition, Compete reported that the percentage of Nextel customers evaluating either Verizon Wireless or Sprint PCS has dropped since last year.
Industry observers said they are not surprised that Nextel has continued to dominate the PTT space, noting the carrier’s Direct Connect service is still considered the standard for both performance and price.
“Nextel has set the benchmark in both service and price,” said Michael Voellinger, director of wireless for Telwares Communications L.L.C., which provides consulting services for enterprise customers. “Enterprises are telling the other carriers that when you have an apple that looks like Nextel’s apple, then come back and talk to us.”
Voellinger added that in addition to the performance superiority of Nextel’s offering, the service also has a large built-in customer base that makes enterprise customers reluctant to stray.
“There is a second level of retention that’s implied in that others are also using Nextel, and enterprises want to ensure that they can continue to communicate with all of their employees and customers.” Voellinger said.
Nextel has continued to upgrade its Direct Connect service, including its highly anticipated nationwide capabilities last summer and more recent international capabilities that allow customers to use the service between the United States, Canada, Brazil, Argentina, Peru and parts of Mexico.
“Nextel is definitely not resting on its laurels,” said Adam Guy, director of wireless for Compete Inc. “They have been very aggressive in keeping Direct Connect fresh.”
Guy also commended Nextel for its Boost initiative, which has allowed the carrier to extend the reach of Direct Connect to prepaid and credit-challenged users, while still allowing interoperability with the flagship postpaid Direct Connect service.
“Boost is being used by a number of contractors that use day laborers and want to keep in contact with their workers without handing over a full-fledged Nextel device and resulting financial risks,” Guy explained.
Boost boasts more than 500,000 subscribers since it was launched in California and Nevada. It recently expanded to a number of additional markets, including Philadelphia, Chicago, New York, Washington, D.C., and parts of Texas, Florida and Minnesota.
While analysts admit Nextel is likely to rule the PTT roost for the foreseeable future, competing offers using next-generation networks are expected to make inroads on both the performance and feature fronts, which Nextel could have trouble matching with its iDEN network.
“Nextel has to be concerned about relying on a proprietary technology,” Voellinger said. “I’m sure the other carriers will continue to refine their technologies.”
In addition to upgrades to current networks, The PTT market is expected to see increased competition later this year as a number of infrastructure providers are readying their own standards-based solutions, including the PoC specification supported by Nokia Corp., L.M. Ericsson, Siemens AG and Motorola Inc.; Lucent Technologies Inc. working with current Alltel supplier Kodiak Networks Inc.; and Nortel Networks Ltd. teaming with software provider Togabi Technologies Inc. and Hewlett-Packard Co.
