Subject: [NEXTEL-1] PUSH-TO-TALK BATTLE ERUPTS IN WAR OF WORDS

From: [email-masked]
Date: Thu, 18 Sep 2003 12:41:13 -0400

PUSH-TO-TALK BATTLE ERUPTS IN WAR OF WORDS

 By Dan O'Shea

Telephony, Sep 15, 2003

After one month of push-to-talk competition between Verizon Wireless and market
incumbent Nextel Communications, Verizon is insistent it has made strong
inroads—even as critics lambaste the service quality of the company's
application.

Denny Strigl, president and CEO of Verizon Wireless, said last week that the
company's push-to-talk service is selling ahead of expectations. Dick Lynch,
chief technical officer, said the carrier already has ordered more Motorola V60p
push-to-talk enabled phones based on the application's early success. Verizon
plans to make a second push-to-talk handset available before Christmas, Lynch
said.

At the same time, however, analysts and users who have tried Verizon's
push-to-talk offering maintain that they are not impressed with it, due in large
part to call set-up and intra-call latency problems. Those critics claim
Verizon's service lags behind the less-than-one-second standard that has been
Nextel's mantra the past 10 years.In an exclusive interview with Telephony last
week, Lynch acknowledged that latency on the carrier's service is greater than
Nextel's, but he defended Verizon's offering as superior overall and pledged that
the carrier will make the changes necessary to boost quality.“Yes, the latency's
there,” Lynch said. “We will improve it in any way possible. We will conduct
three to four incremental latency reductions. These will be in milliseconds of
improvement over the next couple years, but those milliseconds add up.”

Indeed they do, according to critics of Verizon's one-month-old service.
Telephony interviewed three current Nextel users and two Verizon users, all of
whom have tried push-to-talk from Verizon. Without dissent, they said the
service's overall call latency was below expectations.

“The latency is there, though it maybe more obvious because I'm used to Nextel,”
said one Nextel user in New York City who made several trial calls with the help
of a Verizon Wireless retail store employee.

“I'm not going to buy it for now,” said a Verizon Wireless customer who tried the
services of both Nextel and Verizon on the same day last week. “The calls I made
took longer to initiate, and the intra-call response seemed longer, too.”

Industry analysts voiced similar concerns. “We trialed it down here in Miami, and
we were not impressed,” said Patrick Comack, senior equity analyst at Guzman &
Co., which is based in Coral Gables, Fla. “There was material call set-up and
intra-call latency. It might make Verizon's phone service stickier for someone
who doesn't use PTT as much, but it's not otherwise going to win over Nextel's
heaviest users.”

Ned Zachar, director of telecom services research at Thomas Weisel Partners in
New York City, agreed. “It will hurt Verizon's efforts to win those customers
because latency is a big issue for them,” he said. “It's also priced at a
premium, which won't help.”

Comack added, as did other analysts, that the carrier may have made a strategic
mistake in launching the service with such an aggressive advertising campaign. In
launching a product with greater latency, Verizon has exposed itself to
dyed-in-the-wool Nextel users who may try the service, notice the difference and
not come back, Comack said.

Lynch dismissed the idea that a large number of users will refuse to buy the
service based on the latency issue, when they look at what else Verizon is giving
them. For example, Lynch pointed out that Verizon users easily can manage their
group call lists via the Internet. Presence management functions allow for an
icon for every group list member, which changes as that user initiates a call,
ends one or turns off the phone.

Verizon users also only require a single phone number to do push-to-talk and
other calling, he said. Nextel issues users regular phone numbers and separate
nine-digits identification numbers to conduct push-to-talk calls.

“The latency thing is a torpedo from our competitor,” Lynch said. “When users see
things like our presence management, they'll see that it's a bigger deal.”

Meanwhile, Nextel isn't standing pat on its market-leading service. The carrier,
which completed rollout of its Nationwide Direct Connect just a few weeks before
Verizon launched its offering nationally, announced Direct Connect availability
for the northern part of Mexico's Baja California through NII Holdings, a Latin
America iDEN network operator in which Nextel owns a 35% stake.

The foray into Mexico is the first step in an international strategy that will
next take the carrier into Canada, said Greg Santoro, vice president of Internet
and wireless services at Nextel. “We have a lot of subscribers in the
southwestern U.S. that wanted it, and NII has built iDEN sites there, so that
makes it a seamless place to start,” Santoro said.

In addition to Nextel's expansion efforts, Weisel's Zachar said he expects the
carrier to continue to enhance overall network coverage with increasing
competition and local number portability nearing.

Santoro said the Mexico offering wasn't a response to Verizon's recent launch.
“What our competition is doing had no bearing on this decision,” he said. “Our
‘sub-second’ latency and nationwide—and now extended—coverage speaks for itself.”

Still, the current marketing and advertising slugfest between Verizon and Nextel
suggests that the two competitors are paying quite a bit of attention to one
another. In its broadcast ads, Verizon mocks Nextel's network coverage
shortcomings, while Nextel ads make jabs at Verizon's latency.

Verizon's Strigl addressed the marketing issue at the Morgan Stanley Media &
Communications Conference last week. “Nextel's ads are entertaining me,” he said.
“The competition's users are telling us they're unhappy with their current
service.”

Verizon would divulge neither customer numbers nor the number of Nextel customers
it has converted. “We have sold a whole degree of magnitude more devices than we
thought we would have at this point, and new devices that we introduce to the
network will not have an effect on quality,” Lynch said.

How Verizon's new service might affect other potential push-to-talk competitors
remains to be seen, however. Sprint PCS has been testing push-to-talk for at
least two years and has indicated it would launch its service, reportedly called
ReadyLink, by the end of this year.

Sources speculated last week that ReadyLink will launch sooner, possibly as early
as Sept. 22. Sprint PCS representatives declined to confirm or deny that.

Sprint PCS President Len Lauer, also speaking at the Morgan Stanley conference
last week, said his company's service would compare well to Verizon's. Several
analysts said they doubt that Sprint PCS will be able to match Nextel's latency
mark, and several also said they expect would-be competitors such as Sprint PCS,
AT&T Wireless and Cingular Wireless to launch push-to-talk no sooner than some
time next year.

But there already is more competition: fastmobile, which offers a
push-to-talk-like voice instant message service in the U.S. Last week fastmobile
expanded its service, called fastchat, into the U.K. The fledgling firm's
differentiating points are its focus on the 18- to 30-year-old demographic and
the ability to download fastchat and other applications from the Internet to
Symbian smartphones.

Harry Eschel, co-founder and vice president of marketing at fastmobile, said the
marketing blitz by Verizon and Nextel is helping his firm. “They are putting a
ton of money into educating the market,” Eschel said. “We have seen an uptick in
dealers contacting us about distributing our service because they are perceiving
a need for it.”

As for fears of competition from the giants, Eschel said,“Verizon isn't really
coming after our demographic. They're in their sandbox, and I'm in mine.”

A sandbox is also an apt metaphor for push-to-talk service boundaries. There is
no way for customers of different carriers to use push-to-talk with other
carriers' users. Verizon's Lynch said push-to-talk interoperability with another
CDMA carrier would not be technically difficult, but added “I'm not sure I want
to do that with another carrier tomorrow.”

Elsewhere, a group of GSM vendors led by Ericsson, Nokia, Siemens and Motorola
made progress on that front last week, sending a new standard to the Open Mobile
Alliance that defines intercarrier push-to-talk for GSM. No GSM operators have
launched push-to-talk yet, but Ericsson will have a commercially available
push-to-talk product in 2004, said Jonas Ericsson, director of push-to-talk
programs at Ericsson.

Call latency was key to setting the GSM standard, he said. “We have tested it and
reached delays of a little bit more than one second. We will improve on that.”
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