Subject: [NEXTEL-1] GUEST COLUMN: Push-to-Talk in Latin America

From: [email-masked]
Date: Sun, 05 Oct 2003 05:06:10 -0400

GUEST COLUMN: Push-to-Talk in Latin America
October 3, 2003 1:31pm
BNamericas.com

Push-to-Talk in Latin America: Underestimating NII Holdings

By Jose F. Otero, independent telecoms consultant
The availability of solutions for the launching of "push-to-talk" (PTT) services
by cellular/PCS networks has been followed by continuous analysis about the impact
of this application on the mobile industry, and more specifically on iDEN
operators Nextel Communications and Nextel Partners in the United States. This is
not an isolated occurrence as Latin America is experiencing similar scrutiny due
to the imminent PTT arrival in the region. This brief analysis reviews some of the
mainstream explanations of PTT's impact in the region in order to verify their
validity and demystify inaccurate assumptions.

TECHNOLOGICAL REQUIREMENTS

First, it's important to consider that PTT applications require a network that
permits packet switch data transmission. In other words, only next generation
networks (i.e., CDMA2000 1X and GPRS) are able to support this new service.
Currently, PTT is commercially available under both technological platforms -
CDMA2000 1X and GPRS - with Fastmobile's Fastchat solution for GPRS networks
preceding Verizon Wireless' proprietary PTT solution commercial launch in the US.

ERODING THE iDEN CUSTOMER BASE: A HANDSET ISSUE?

One of the most recurrent arguments about the offering of PTT by mobile operators
is that their investment to launch the service compounded with expensive
PTT-enabled handsets will force mobile players to aggressively target Nextel
corporate clients, as they need to be able to recoup their investment.

This assessment is not entirely accurate as it is based on an erroneous
assumption: handset costs are going to be higher due to the PTT capability, thus
leading to higher subsidies. Although some manufacturers such as Nokia and Siemens
are launching handsets with an extra button for PTT this doesn't imply that
consumers won't be able to use PTT in their existing CDMA 1X or GPRS handset. Some
solutions already allow for the provision of PTT services on handsets already
available in the market without the addition of any components.

The impact of these solutions to a market like Mexico is significant, as it
theoretically would allow the largest mobile operator, Telcel, to rollout PTT
service to reach a broader customer base with minimal incremental costs and no
alteration in the company's handset subsidization policies. Therefore, by making
the service available to the mass market Telcel could gain a faster
return-on-investment than if it just launched PTT for the corporate sector.
Mexican CDMA players are considering a similar approach - PTT for the mass market.
Thus, it is not surprising to hear Unefon declare that it considers PTT (together
with picture transmission) to be one of the two killer applications for next
generation networks.

APPROACHING NEXTEL SUBSCRIBER BASE

The belief that mobile operators launching these services must target the
corporate sector or run the risk of not being able - at least in the short term -
to recoup their investment is another misconception based on the false premise
that high subscriber acquisition costs (mostly due to handset subsidization) would
prevent mass-market rollout of the service, thus making Nextel's subscriber base
the ideal target objective for this new service.

It's important to understand that Nextel's PTT services in Latin America are being
commercialized differently than in the United States. In other words, one cannot
talk about having 'subscribers' churning from Nextel in Mexico to a mobile
operator but mostly of one enterprise customer canceling (or not renewing) the
Nextel contract and then assigning it to a mobile operator as they are the one
ordering the handsets for their blue and white collar workers. This is extremely
difficult to do because churn between companies is much lower than for individual
users, as the company would have to replace all the handsets (and their respective
numbers

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