Subject: [NEXTEL-1] Nextel Users Connect With 'Push To Talk'.html

From: [email-masked]
Date: Fri, 02 May 2003 16:23:50 -0400

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Investor's Business Daily

Nextel Users Connect With 'Push To Talk'
Friday May 2, 10:30 am ET

By Reinhardt Krause

Imitation might well be a form of flattery, but in the business world it's cause for concern.
Just ask wireless phone service provider Nextel Communications Inc. (NasdaqNM:NXTL - News) The company has thrived amid tough times in its field because it focuses on business customers, not consumers, and because of Direct Connect.

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Developed by Motorola Inc., Direct Connect sets up phone calls via a walkie-talkie technology that's built into Nextel cell phones. At the push of a button, subscribers can talk to dozens of people - if they also use Nextel phones.
Nextel has been the only service provider with a Direct Connect-type product. But rival carriers plan their own push-to-talk features.
If those copycat products prove popular, that's trouble for Nextel, say analysts. Nextel, however, says it has years of technical and marketing prowess that can't be easily duplicated.
Paul Saleh, Nextel's chief financial officer, recently spoke with IBD about Direct Connect's upcoming competition.
IBD: How many of Nextel's 11 million subscribers use Direct Connect?
Saleh: More than 90%. About 35% of our minutes on the network are Direct Connect.
That's 35% of the 650 minutes per month that are used on average by our customers.
IBD: Nextel is going after the youth market via a marketing trial with your joint venture Boost Mobile LLC, a wireless company that offers services just to youths. How popular is Direct Connect with Boost's 60,000 subscribers?
Saleh: We felt this market segment would be a big user of (Direct Connect).
We're realizing that to be the case. They're greater users of push-to-talk than our average customer base in terms of minutes on the network. They're over 35% of minutes.
IBD: Why are so many equipment makers and service providers trying to develop push-to-talk?
Saleh: Our success has led (rivals) to pay attention to what we're doing that's unique. So they talk a little more about going after the business customer. And they look at the push-to-talk capability and our high ARPU (average monthly revenue per user).
The reality is they're producing a product that's inferior to what we have.
It'll take awhile to get to the point where it's even comparable to (Direct Connect). (Their efforts) will actually raise awareness about push-to-talk, about the capability. Once people experience something, they won't accept a substandard offering.
IBD: Sprint PCS, Verizon Wireless, Alltel and AT&T Wireless have all said they'll offer push-to-talk products. Do you expect any will be available this year?
Saleh: It's hard to speculate. Sprint PCS has pushed back (its rollout) quarter after quarter, year after year.
IBD: Some analysts say the new push-to-talk products might target consumers rather than business subscribers.
Saleh: That may be the case. But I would suggest that for consumers or for business users, there are still issues.
The youth market is very much into performance. It's into instant gratification, instant communication. It's hard for us to imagine that they would be drawn to a product that's inferior.
Our subscribers generally are performance-oriented people, they're business-oriented. They depend on our service to conduct their business more efficiently. We don't think they would be attracted to a product that's suboptimal.
IBD: One analyst says the new push-to-talk products would be best suited for "voice instant messaging" aimed at families, not ongoing group calls. Another possibility is said to be "chat room" type services.
Saleh: There's speculation that there's a group of people that may be more willing to accept (lower performance) in a messaging environment. I'm not sure there's a big market there. Until these carriers roll out their solutions and we see how the market reacts, we're just guessing at this stage.
IBD: Nextel says Direct Connect has an edge over other push-to-talk technology in setting up group calls and in having much shorter delays during conversations, correct?
Saleh: Once a user pushes a button to talk, latency is how much time it takes for a user to connect to another person. That can take up to six seconds with some other approaches. Our setup is sub-one second, about 750 milliseconds.
IBD: Do some push-to-talk firms use buffering techniques - storing audio for playback - to mask conversation delays?
Saleh: The buffering technology introduces other problems. In a push-to-talk environment, sometimes someone is talking and doesn't know if the other person has received the message. So they hit the button again and try to communicate again. You can get colliding messages.
IBD: Does it worry you that gear makers Ericsson, Siemens and Nokia recently agreed to develop an open standard for push-to-talk products?
Saleh: Everybody believes our success stems solely from our push-to-talk capability. That's not the case. It's a contributor, but we have many things.
We have a distribution channel strategy that's business oriented. We have (software) applications for customer segments, such as field service personnel or in the government or construction industry. It's about how you incorporate the product into your business environment.
IBD: Out of all the push-to-talk start-ups developing technology - privately held companies such as Togabi Technologies, Sonim, Winphoria and Airvana - which one comes closest to the real thing?
Saleh: None. We're familiar with some of them because a couple of years ago we looked into developing a version of Direct Connect for a CDMA (code division multiple access) network. So we heard a pitch from them.
At the end of the day, we decided to go with Qualcomm and Motorola together to develop (a CDMA Direct Connect product). We're still working on it, for when and if we ever build a CDMA network.
IBD: Direct Connect has worked within specific markets, but Nextel this year plans to offer a national version. How many customers need wider reach?
Saleh: A survey of our customer base indicates that it's important to about 40%. We are also working with Motorola and Qualcomm on developing push-to-talk on a global basis. That's our next step.

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