One of the hottest trends among U.S. wireless carriers this year has been the build-out of push-to-talk service. But don't expect to see many high-quality services competing with Nextel Communications Inc. anytime soon.
Within the next 12 months, Sprint PCS, Cingular Wireless and AT&T Wireless Services Inc. plan to launch push-to-talk technology, which enables cellular handsets to work like peer-to-peer walkie-talkies at the push of a button. Technology enablers like Fastmobile Inc. and Kodiak Networks Inc. are pitching push-to-talk apps as well.
Verizon Wireless launched a push-to-talk service earlier this year, and the company reports that 100,000 subscribers have already signed up. However, severe latency problems have hurt the company's chances of competing with Nextel, said T.J. Mahony, senior wireless analyst with Boston-based Compete Inc.
Nextel has for years been the market's 800-pound gorilla. The company has built its reputation on providing high-quality, low-latency push-to-talk service, and it boasts more than 10 million subscribers on its proprietary network.
Why are so many carriers jumping on the push-to-talk bandwagon now? Mahony said they're doing so for the same reason that they're now offering other special deals and incentives, such as bonus minutes, nighttime calling periods that start as early as 7 p.m., and weekend calling periods that begin on Friday.
"It's basically a result of the commoditization of [wireless]
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voice service," Mahony said. "How do you resonate with customers if you can't compete on price anymore? You need to have either great marketing campaigns or differentiating services."
Though Nextel could have a handful of new push-to-talk competitors by this time next year, Mahony said, the company's "strong hold" on the market won't be easy to break.
"They've build an entire brand around this," Mahony said, "and competitive entries can't match it on a performance level. Even if latency issues are resolved, [Nextel] has created so much value by having 10 million people on the same network. If I buy Verizon's service today, there's almost nobody I can contact with it," as the two networks aren't interoperable.
Mahony said it will be difficult for the other carriers to compete with Nextel, but they could eventually pose a competitive challenge.
"Verizon, Sprint and non-Nextel push-to-talk providers are going to have to price their services extremely aggressively to compete with Nextel," said Mahony, meaning customers could benefit from "huge discounts" as providers seek to quickly build their customer bases.
That could mean great deals for companies looking to save money on push-to-talk service, but Mahony said customers shouldn't expect the same quality of service that Nextel offers, at least not for some time.
"Nextel has cultivated a loyal and happy user base that's highly profitable but, at the same time, when we saw the Verizon service launch, we saw a surge in the level of interest [among Nextel customers] in moving to Verizon," Mahony said. "So it signals that, in the long term, there is a significant value proposition that completive push-to-talk service offers."
FOR MORE INFORMATION:
Learn more about Fastmobile's push-to-talk service.
Read more stories by News Editor Eric B. Parizo.
This was first published in November 2003