Subject: [NEXTEL-1] The next Nextel?

From: [email-masked]
Date: Mon, 21 Jul 2003 22:21:03 -0400

The next Nextel?

Privately held Fastmobile makes software that turns cell phones into
walkie-talkies.
July 21, 2003: 11:14 AM EDT
By Paul R. La Monica, CNN/Money Senior Writer

NEW YORK (CNN/Money) - It's a tough time for wireless carriers.

The one company that has enjoyed major success this year is Nextel, and most
analysts attribute the company's good fortune to the fact that its walkie-talkie
phones differentiate it from the rest of the industry.

With Fastchat, users scroll through buddy lists and can push a button to instantly
connect to that person.
Nextel has the highest average revenue per user in the wireless industry and the
lowest churn. In plain English that means Nextel subscribers pay more than anyone
else a month and very few are finding a reason to cancel their plans. That's truly
astonishing in an industry with brutal price competition.

One problem with Nextel, though: you can only talk to other people with Nextel
phones. Have a Nextel walkie-talkie and you want to instantly get a hold of your
brother on his Sprint PCS phone? No can do. (Of course, you could just give him a
regular call).

But a small upstart company called Fastmobile has a push-to-talk product already
on the market. The closely held company offers a service called Fastchat that can
be downloaded from the Internet, just like a ring tone, to your phone. With
Fastchat, just like Nextel, users can push a button to talk to other people who
have the software on their cell phone.

Currently, Fastchat works on phones operating on the global standard for mobile
communications, or GSM, which means that if you're a Cingular customer, you could
talk to people who have service from AT&T Wireless or T-Mobile.

But Harry Eschel, co-founder of Fastmobile, said the company hopes to have a
version that can be downloaded to phones that work on the competing CDMA standard
within the next few months. Once that happens, Fastchat would be compatible with
Verizon Wireless and Sprint PCS as well.

"Nextel deserves credit for converging the two-way radio with a phone. We wanted
to take that feature and offer flexibility and freedom to contact people on
different networks," Eschel said.

Does it work?
It all sounds cool but does the service work? I tested it out with two Nokia 3650
phones. So far, the only phones capable of downloading Fastchat are the Nokia 3650
and the Sony Ericsson P-800. But Eschel said more models from Nokia, in addition
to some from Motorola, Samsung and Siemens, should be ready for the software by
the end of the year.

I tried out Fastchat with my fiancée in our apartment and the service was a bit
clunky. We were able to "talk" but often we did not get through to each other
instantly. What frequently happened was that one of us would talk and then a
second or so later, the other received a Fastchat voice message that you needed to
play back.

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Playing around with the phones for a bit, the service started to work a bit better
and we were able to engage in chats with Eschel and a public relations official
for the firm in Chicago with very little delay.

All in all, I thought it was neat but ultimately, I'm not sure it's something I
need, especially since the service was far from perfect. If I want to call someone
on my cell, I can just do that. Waiting a few seconds for a connection is not that
much of a burden.

If more people feel the way I do, that could ultimately be a problem.

Randy Rissman, former CEO of toy maker Tiger Electronics and now managing director
of Leo Capital Holdings, a venture capital firm that has invested in Fastmobile,
said the Fastchat service would be marketed more toward the average consumer
rather than the blue-collar corporate market, such as the construction and
transportation industries, where Nextel is dominant.

Too late to the push-to-talk party?
Another possible stumbling block is that Fastchat, which costs $9.95 a month for
unlimited push-to-talk, text and picture messaging, is a voice over Internet
protocol (VOIP)-based service, not a two-way radio connection like Nextel. So if
you want to subscribe to Fastchat, your phone also needs to have a separate
wireless Internet connection, which of course, costs more.

And when push (pardon the pun) comes to shove, it seems that the walkie-talkie
aspect, and not Internet data services, is what is really driving demand for
Nextel's service, according to industry analyst Greg Gorbatenko, at Loop Capital
Markets. That doesn't seem to be lost on Nextel's competition.

Verizon Wireless is set to unveil its own walkie-talkie phones soon and Sprint PCS
and AT&T Wireless are said to be looking at introducing their own products next
year.

Click here to check wireless stocks

"Carriers got deceived into thinking that the true killer app was data but they
are waking up to the fact that they need to be in push-to-talk," Gorbatenko said.
"I'm a little concerned that Fastmobile may be too late to the party."

Eschel said that Fastmobile has so far raised about $5.2 million, which is not a
huge amount, especially when you consider how much money the big cell phone
carriers have at their disposal.

And so far, the company has only a few hundred paying customers. Eschel said
Fastmobile hopes to have a more aggressive marketing push in the fall. For now the
service is available at the company's Web site.

http://money.cnn.com/2003/07/18/technology/fastmobile/

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