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Issue #2003 - 09 (March 2003)
(Updated Mar. 19, 2003)


Carriers Hot To Trot Push-to-Talk (P2T)

Source: By Dan O'Shea of Telephony

Push-to-talk is nothing new, but you wouldn't know it from the attention the industry has lavished on the mobile “walkie-talkie” application in recent weeks. Carriers, awakening to Nextel Communications' success with the service — as well as their own dire needs to improve revenue and win enterprise business — are poised to begin push-to-talk trials later this year.

Meanwhile, major network vendors launched an interoperability alliance ensuring broad adoption of push-to-talk over a variety of infrastructures — initially GPRS and EDGE, and later, CDMA. Though debate still simmers over technical performance of new offerings, the global industry seems to be rallying around one belief: Push-to-talk is the next killer app.

“Push-to-talk is the most compelling application since voice,” said John Burns, president and CEO of Sonim Technologies. Granted, as a company working on a SIP-based technology to support the application, Sonim has everything to gain from the industry believing him. But as recent events may indicate, many hear a ring of truth in that ambitious declaration.

Egged on by carriers hinting they're ready to commit to implementation, Ericsson, Nokia and Siemens say they'll issue an open-standard network specification for push-to-talk over GSM and EDGE networks within the next two months. In a somewhat unusual move, the big infrastructure vendors are side-stepping the usual slow-motion standards process by collaborating with companies such as Sonim, Winphoria Networks and Airvana to create the spec as part of an “urgent” response to carrier demand, said Fredrik Alatalo, business development director for GSM/GPRS and EDGE networks at Ericsson.

The spec will then be turned over to an industry standards body, though it is not yet clear which one, he said.

Tapio Heikkila, business development director at Nokia, added, “We pursued the openness because we were concerned that the market could fragment in the absence of standards at a time when the application is ready to reach critical mass.”

Further evidence of industry progress toward mainstream push-to-talk services should be on display next week at the Wireless 2003 trade show in New Orleans, where Sonim will reveal its first major infrastructure partner, Burns said.

So why is the industry so pumped about push-to-talk? Numbers tell the story: Nextel's average revenue per user (ARPU) each month is $70 — higher than any other carrier by a whopping $8. It also has an annual churn rate of only 2.1%, the lowest in the industry. The carrier's Direct Connect service, based on push-to-talk functionality, is largely seen as a core differentiator separating Nextel from the carrier pack and helping it to post such impressive numbers.

“Vendors and operators didn't really understand the true potential of the service in years past,” Alatalo said. “While Nextel used the application to target the enterprise, the rest of the industry didn't pick up on that right away.”

AT&T Wireless was rumored to be toying with the idea of offering push-to-talk service more than four years ago (Telephony, Sept. 28, 1998), when the carrier was said to be working on a switch-based solution with Ericsson, but nothing ever came of those reports.

With packet networks providing a better platform for the application and Nextel's high ARPU and enterprise success proving the allure, carriers are changing their tunes about push-to-talk. When Nokia, Ericsson and Siemens announced their push-to-talk cooperative at last month's 3GSM World Congress, AT&T Wireless and Cingular Wireless tagged along on the announcement, saying they supported the effort. A few days later, AT&T officially confirmed it is planning a push-to-talk trial in Seattle later this year. In doing so, it became fourth major carrier after Verizon Wireless, Sprint PCS and Alltel to commit to a field trial.

Carriers have offered precious few details about their push-to-talk market rollout strategies. An AT&T Wireless spokesman said it was too early to talk about the company's strategy, and an Alltel spokesman would say only that the company, which is using Winphoria technology in a lab trial and eventually will do a market trial, will plan a commercial launch if all goes well. T-Mobile also reportedly has completed a test with vendor FastMobile, but has not announced other plans.

However, it would be a mistake to translate the carrier silence as tentativeness, Sonim's Burns said. “Publicly, all of the carriers are only committing to trials, but internally carriers are rallying their resources and marketing budgets to support this application,” he said.

Still, new push-to-talk offerings may not match the quality users have become accustomed to with Nextel's service.

For example, Nextel adheres to a call setup time limit of no more than one second. Competitive offerings haven't met that standard yet, according to several sources, though they are working toward it.

“If you get to three or four seconds [for setup], it's almost like a regular call isn't it?” one analyst suggested.

Nextel does indeed see one second as necessary. “The fast and reliable setup is really core to the service,” said Drew Caplan, vice president of national network services at Nextel. “For immediate call setup, you have to be constantly tracking the handset on the network. You can't do that with voice over IP,” which some competitive offerings are based on.

“Nextel has scaled from 300,000 subscribers when we launched it to about 11 million subscribers. We will do 30 billion to 40 billion minutes of Direct Connect traffic this year,” Caplan added.

Nextel seems to lead the industry in ARPU (Average Revenue per Unit0 and % churn.

  ARPU Churn
Nextel  $70 2.1%
Sprint PCS $62 3.3%
AT&T $60 2.6%
Cingular $51 2.6%
Verizon $48 2.3%
T-Mobile $48 4.2%

Source : Nextel

However, Ericsson and Sonim, among others, promise that competitive offerings will be technically tight. “The industry would not launch a service that wasn't on par with the Nextel service,” Ericsson's Alatalo said. “It has yet to be proven, but it will be on par.”

Whether new competitors can make a dent in a market segment Nextel dominated for a decade remains to be seen. Mainstream push-to-talk could chip away at the ARPU gap, Burns and several analysts said.

Meanwhile, Nextel isn't standing pat. The carrier is already rolling out nationwide Direct Connect in “a number of cities” and will complete that offering in the third quarter of this year, said Blair Kutrow, vice president of product management at Nextel. That's around the time when most other carriers will be just starting their initial trials.

Also, the company is “focusing on growing revenue and users within our biggest accounts,” Paul Saleh, executive vice president and CFO at Nextel, told attendees at a Wachovia Securities conference last week. “There is still room for us to grow within these customers.” New applications such as video-based push-to-view and global Direct Connect would emerge sometime next year, he added.

In addition to these efforts, Nextel executives say copying the company's formula for success will not be as simple as adopting one particular application.

“It's one thing for a competitor to replicate the technology, but it's another thing for them to back up that application with the service experience that we offer,” said Greg Santoro, vice president of Internet and wireless at Nextel. “Just because other carriers have the service, that doesn't mean it ceases being a differentiator for us because we have a lot more that we wrap around our core value proposition. We have very focused distribution, and our people are very familiar with the vertical industries we're selling into.”

MobileInfo Comments and Advisory: We agree with Dan Shea's analysis. There is no doubt that Nextel has a significant lead on the market in P2T technology from network implementation and service response points of view. Nextel also possesses domain experience of vertical industries where this technology is more applicable - public safety , taxi and traditional FFA organizations. Other carriers will try to duplicate the formula but it will take time. Interesting part of this story is that this will force convergence of voice and data on the same network. For the short term planning horizon, we would give this planning advice - for voice-centric group call applications with slow-speed data (less than $15-20Kbps) requirements, use Nextel's iDEN technology. For high-speed wireless data centric requirements, use 2.5G networks from other carriers. For group call voice-centric P2T combined with high speed wireless data applications, wait for a few more years. Please learn how to make tradeoffs or wait - we live in an imperfect wireless world.

 Note: This news release may contain forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of Securities Exchange act of 1934 in USA. Similar provisions exist in other countries. There is no assurance that the stipulated plans of vendors will be implemented. MobileInfo does not warrant the authenticity of the information. Readers should take appropriate caution in developing plans utilizing these products, services and technology architectures.  All trademarks used in this summary are the property of their respective owners.

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