Subject: [NEXTEL-1] Taking on Mirs (iDEN) in its own field

From: [email-masked]
Date: Sun, 15 Feb 2004 03:48:16 -0500

Ha'aretz, Israel - Jan 20, 2004
Taking on Mirs in its own field

By Hadar Horesh

Long before we all start wandering around with video cell
phones making conference calls, the cell phone companies will
start marketing a "push-to-talk" service. Partner is launching the
first trial of the new service using a Nokia infrastructure.
Cellcom promises a competing service by the end of March, and
Pelephone by the end of June.

It's not a new idea - for years Mirs subscribers have had the
service and thousands of businesses use mobile phones that
also function as walkie-talkies. It is incomparably convenient,
inexpensive and a reliable method of communicating for
businesses based on a staff of workers on the move over a
large area. But few subscribers like to wander around with their
Mirs phone outside work hours.

Even though Mirs devices are technologically similar to the most
advanced devices on the cellular market, their design is not
outstanding and the intensive use of Mirs by courier services
contributes to the blue collar image of the device. The advantage
of the walkie-talkie function in group communications eased
Mirs' penetration of the market, and the business market is
similarly the main sector the cellular companies seek to conquer
with their "push-to-talk" service.

But Partner, Cellcom and Pelephone will try to sell the service to
the private market as a convenient way for families and teens to
communicate. Mirs failed to go after the non-business
customer, but the marketing power of the big companies, plus
their more fashionable devices, might succeed in bringing the
walkie-talkie to new markets.

Mirs is not playing down the threat. Company sources say the
entry of the cellular operators to the market is not a threat, but
opens new opportunities because of the attention the market
will attract. In private discussions and conversations with the
Communications Ministry, however, there is a marked fear for
the company's future.

A scenario in which Mirs is completely edged out within a few
years is not unrealistic. The company's subscriber base -
240,000 - is equal to the number of new subscribers the big
companies sign up every four months.

Mirs' legal representative, attorney Renato Yarak, sent a
demand to the Communications Ministry that the cellular
companies be required to obtain a special license for the new
service, and that high licensing fees be charged. The ministry
has not yet formulated a clear policy on the matter. "We
understand that we cannot halt technical developments, but
have the responsibility to ensure fair competition," says the
ministry spokesperson.

Communications Ministry Director-General Uri Olenik made
approval of the "push-to-talk" service conditional on the
submission of the terms of service to the ministry for its
examination. The ministry's spokesperson says that Olenik plans
primarily to examine the terms of the transfer of conversations
between the cellular networks.

Communication between the networks creates obstacles in the
market and enables the cellular companies to charge
exaggerated prices for conversations between one network
and another. The ministry may make the permits conditional on
restricting the rates charged for conversations between the
networks, or even the cancellation of such charges.

The ministry may also delay the commencement of the service,
but sooner or later Mirs will be exposed to competition in a
market that had been its sole domain. It is hard to imagine that
this company, which recorded its first net profits only in 2003,
will not be harmed. Even if Mirs manages to maintain its
subscriber base, the company will have to cope with a fierce
price war.

Mirs has a certain technical advantage in the response speed
of its devices, but it is doubtful if this advantage is enough to
maintain Mirs' control of the market. In the Mirs network, the
response time is 0.3-0.6 seconds, and research has shown that
users are willing to tolerate communications gaps of no more
than 1.5 seconds. Sources at Partner say they have reached
the response time threshold in trials.

Marketing race begins

Since Nokia announced its "push-to-talk" system in early 2003,
all the cellular telephony firms have joined the development and
marketing race. Motorola has so far led with its walkie-talkie
system, which uses IDEN technology. The American company
Nextel and the Israeli Mirs also use this technology.

The introduction of "push-to-talk" service on cellular networks
using GSM technology, like Partner and Cellcom, or the CDMA
technology used by Pelephone, requires a new and different
system. Nokia and Motorola are the main competitors to supply
the "push-to-talk" system to the Israeli cellular companies.

Motorola had to buy the startup Winforia to develop a product
that would compete with Nokia's. Now the two companies are
vying to supply systems to Partner and Cellcom. Pelephone is
conducting talks with Motorala, Qualcomm and the Israeli
company, Mobile Tornado.

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