Nextel's Stranglehold Soon to Be Tested

May 28, 2003
Now that Nextel has proved people like the feature and is expanding its reach, other companies are rushing out similar options.

PHILADELPHIA (AP) -- When Philadelphia schools security chief Dexter Green wants to contact one of the 450 officers who oversee the district's 210,000 students, he pulls out a cell phone and uses it like a walkie-talkie.

Green, like millions of firefighters, police officers, city employees and blue-collar workers, uses Nextel Communications' direct-connect ``chirper feature'' _ as district spokesman Vincent Thompson calls it --because of its instantaneous contact.

``We have a huge district and we have found that Nextel does a very good job of letting us communicate,'' Thompson said.

Nextel has had a monopoly for years on the walkie-talkie feature, known as ``push-to-talk'' in the wireless industry. The Reston, Va.-based company has used that advantage to cultivate 11 million customers, including some 3 million blue-collar and public-sector workers.

But that lock on the market won't last. Now that Nextel has proved people like the feature and is expanding its reach, other companies are rushing out similar options.

The Nextel phones, developed by Motorola Inc., lets users press a single button to launch walkie-talkie communication with other Nextel users within a given area, often the size of a state. The feature is ideal for co-workers who need to talk repeatedly but do not want to call each other over and over or keep a line open for hours.

The walkie-talkie option turned out to be the only reliable way to contact school principals in Boston on Sept. 11, 2001, said Boston Public Schools spokesman Jonathan Palumbo. But despite a long association with Nextel, Palumbo said the school district's loyalty is defined by one thing -- the bottom line.

``We're looking to save money left and right, so I think it's safe to assume that if we could get comparable service at a similar rate, I think it's something we'd entertain,'' Palumbo said.

Indeed, Nextel customers like the Boston schools are about to get several competitive options.

  • Verizon Wireless plans to unveil a push-to-talk feature in the next six months. Spokesman Jeffrey Nelson said Verizon can chip away at Nextel's customer base because of its high-quality network.
  • Sprint PCS also plans a 2003 rollout. ``Nextel has a stranglehold on this market and they've done a great job with the product, but ... we are confident that we're going to be able to attract customers,'' spokesman Dan Wilinsky said.
  • AT&T Wireless plans an announcement in 2004. When it does roll out its walkie-talkie feature, though, users will likely be able to connect with people in more than 100 countries because AT&T's network uses the GSM network standard, widely used worldwide.
  • A new service from a startup called Fastmobile Inc. can be added to wireless phones to replicate the walkie-talkie feature, even for customers on different cellular networks.

Although Nextel has shown there is a market for push-to-talk technology, Roger Entner, an analyst for The Yankee Group, cautions that it is not likely to attract many users beyond its existing market segments. Not everyone, he notes, needs a walkie-talkie connection.

``It's not a fad, but I think the significance of push-to-talk has been blown out of proportion,'' he said.

Next month, Nextel plans to roll out nationwide direct connect, eliminating the range limit on push-to-talk conversations. Its rivals say they'll offer coast-to-coast range, too. Each company's network, however, won't be compatible with that of other companies.

Their entry likely will bring Nextel's prices down over the next 18 months, Entner said. Nextel averages about $70 in monthly revenue per customer, $10 to $20 higher than other carriers.

Nextel spokeswoman Rebecca Gertsmark said her company is not too worried about the push-to-talk competition on the horizon. She said Nextel has built up brand loyalty.

``When push comes to shove, especially initially, there's a reason it took 10 or 11 years to get the service to where we've gotten it,'' Gertsmark said. ``You want to go with the company ... who knows the product.''

Richard C. Harkness, the superintendent of the Tredyffrin Township Police Department, 20 miles west of Philadelphia, said his department's 20 Nextel phones fill in the dead spots the department's police radios don't cover because of hilly terrain.

``Nextel has really become integrated in the public safety world,'' he said. But he noted that it might not always be that way.

``If another company can provide the same service -- bigger, brighter, shinier, newer -- at a better price, then clearly I'm obligated to look at that company,'' Harkness said. ``Nextel only has a monopoly as long as Nextel is on top of the heap.''

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