Subject: [NEXTEL-1] Walkie-Talkies Get A Makeover

From: Marcelrf <[email-masked]>
Date: Wed, 25 Feb 2004 14:34:48 -0500

Walkie-Talkies Get A Makeover
Aude Lagorce, 02.25.04, 8:00 AM ET

NEW YORK - Six months ago, an application that allows cell phones to
morph into walkie-talkies was heralded as the next big thing in wireless
telephony. Suddenly the blue-collar feature was hip and everyone had to
have it--never mind that Nextel Communications phones had been equipped
with the technology for more than a decade.

Within three months of each other, Verizon Wireless, the mobile arm of
Verizon Communications (nyse: VZ - news - people ), and Sprint PCS
(nyse: PCS - news - people ) trumpeted the launch of their own
walkie-talkie features, respectively called "Push to Talk" and "Ready
Link." The services were rolled out with great pomp in the fall. But
since then, the two operators' chirping has gone almost completely
silent.

Walkie-talkies are not exactly the latest technology. But as Nextel
(nasdaq: NXTL - news - people ) will attest, the oldest recipes
sometimes make the best cakes. The company may not have snazzy picture
phones or a third-generation network, but at $69 per month, it still
boasts the highest revenue per user in the industry.

After carefully studying Nextel's balance sheet, market leader Verizon
Wireless and number-four contender Sprint must have concluded that the
primary feature the niche player had going for it that they didn't offer
themselves was a little button allowing for walkie-talkie conversations.
Verizon and Sprint went for it.

Unfortunately--at least initially--the two heavyweights couldn't achieve
the same level of performance as Nextel, which has been fine-tuning the
technology for 11 years. For instance, while Nextel's Direct Connect
walkie-talkie feature establishes a tone in less than a second, it could
take up to ten times as long to get a chirp with Push to Talk or Ready
Link. According to a Yankee Group report published a few days after
Verizon's service was launched, it took 5 to 7 seconds to set up a call
with the application. There were also delays of up to 2 seconds within
the call.

Immediacy and time gain, the two main reasons why people adopt
push-to-talk services, were thus undermined: At this rate, it was almost
as fast to set up a regular call. Additionally, too few handsets were
available and, starting at about $200, they cost too much.

When asked about potential upgrades or modifications, Verizon Wireless
says, "We're comfortable with our product, and the customers who have it
are satisfied with how it works." Sprint PCS puts forth the fact that
consumers consider a number of factors when choosing a provider and that
Ready Link was simply an addition to its portfolio. The company also
says its customers are happy with the service.

Still, there's no denying that the two carriers have gone into stealth
mode about the service. Yet the game isn't over for them, says Charles
Golvin, a senior analyst with Forrester Research. He says the
expectation that Push to Talk could allow Verizon Wireless to poach
existing Nextel customers wasn't realistic. "But the application
nevertheless puts them on par with Nextel when it comes to fighting for
new customers," Golvin adds. The size of Verizon's network is also a big
selling point, since Nextel's coverage outside of big metropolitan areas
is still sporadic.

Adding new features to the push-to-talk application could soon make a
difference when hunting for new business customers. Enter San Ramon,
Calif.-based Kodiak Networks. The startup, which announced contracts
with European operator Orange--partly owned by France Telecom (nyse: FTE
- news - people ) and U.S. number-seven carrier Alltel (nyse: AT - news
- people )--last month, offers interesting additions to the traditional
push-to-talk services, including the availability of call waiting during
an instant call, the scheduled delivery of voice mail, and the capacity
to transform an instant call into a regular call at the push of a
button.

Kodiak's other big advantages: Its technology is compatible with both
U.S. standards CDMA and GSM; the service works on an analog
network--whereas comparable services from Sprint and Verizon run on a
data network--making it a lot faster as well as less costly to set up;
and the startup makes the technology available free to handset makers,
so a wider array of products should soon be available. Kodiak Chief
Executive Craig Farrill forecasts that 12 such handsets should be on the
market through Orange by the end of the year, and that the operator
should have about 1 million customers by then. Kodiak makes money by
selling the network platform side of the Kodiak RTX (real-time exchange)
System to wireless carriers, who plug it into their networks to perform
push-to-talk switching and other operations.

"Voice has been kind of sitting there while data was being developed
with the advent of 3G. This is the comeback of voice," says Farrill, who
wants Kodiak's technology to become the standard for carriers that want
to offer a push-to-talk application without making a huge investment.

For now, although they haven't encountered the success anticipated,
Sprint and Verizon are unlikely to give up on the push-to-talk feature.
"They're not going to abandon it, but they've got higher priorities
right now, especially with the AT&T Wireless-Cingular Wireless merger,"
says Jon Arnold, a telecom analyst with Frost and Sullivan.

Should the two carriers decide to push ahead with the technology, they
might be tempted to try Kodiak, if only because it may solve some of the
delay problems that have analysts complaining. Kodiak's technology is
not as fast as Nextel's--it takes about 3 seconds to set up a call--but
to people who have never tried a Nextel phone, it may well be good
enough. In a report about Alltel's Touch2Talk service, which is provided
by Kodiak, Yankee Group analyst Adam Guy writes, "While call setup
latency averaged about 2 seconds, the intra-call latency was almost
nonexistent. The setup is an improvement over Push to Talk and Ready
Link." Verizon declined to comment on whether it would consider adopting
Kodiak's technology, while Sprint said it is always looking for ways to
improve its service.

Still, some remain pessimistic about how widespread the success of
push-to-talk applications could become. After all, only 8% of
non-push-to-talk users are "very interested" in the service, according
to the Yankee Group. "From a consumer perspective, the value of the
service hasn't been demonstrated. There has been no killer application
so far," says Golvin of Forrester Research.

http://www.forbes.com/personaltech/2004/02/25/cx_al_0225nextel.html?
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