Business finally is taking off for some of the players with nationwide coverage plans in the enhanced specialized mobile radio arena.
With technology bugs worked out, marketing and distribution strategies set and coverage areas improved, digital SMR companies are seeing their work pay off: a ramp-up of subscriber additions.
After delaying service deployment and marketing efforts in early 1996 because of network problems, Nextel Communications Inc., with more than 1 million total subscribers, is the golden child of the SMR industry, adding nearly one-third (322,200) of its total subscriber base during the third quarter. It recorded 946,600 digital subscribers as of Sept. 30. Just year ago, it had roughly 228,000 digital customers.
Nextel, a nationwide player, offers a service that integrates a digital phone, alphanumeric pager and two-way radio based on Motorola Inc.’s integrated Digital Enhanced Network. Aimed at work groups because of its instant conferencing feature, Nextel, which doesn’t charge for roaming, not only addresses the needs of the traditional SMR user but also has made a dent in the mobile phone industry because it is suited for high-end cellular users who are frequent roamers.
“It has had an incredible loading experience,” said Steve Virostek, senior consultant, North American telecommunications with the Strategis Group in Washington. “Even the largest cellular and PCS carriers aren’t loading [customers] as fast.”
Prudential Securities Inc. in New York has noted that Nextel may enjoy the same demand pull as other work-group applications like the fax machine, e-mail and the Internet.
Nextel plans to tie all of its 800 MHz licenses gained through auctions or by acquiring other SMR companies into a nationwide network. The carrier operates in more than 350 cities across the United States and offers service in 70 of the top 100 markets. It has launched massive advertising campaigns in its markets showing the benefits of its all-digital, integrated service.
Geotek USA, using its proprietary Frequency Hopping Multiple Access technology, increased its subscriber base from 2,000 in the first quarter to 10,000 at the end of the third quarter, said Geotek’s Senior Vice President of Sales and Marketing Ken May.
“They’re definitely in a loading stage, and they’re loading as quickly as they can,” said Virostek. “They had some network issues around the beginning of this year. Two-way radios weren’t going to put their reputation on the line.”
“There is a combination of things that naturally happened with the evolution of any new company with new technology,” said May. “The awareness of Geotek has increased. Not too many people knew who Geotek was. We don’t encounter that anymore … Our dealer engagements have increased significantly. Importantly, not unlike other companies, our technology issues are now behind us. We’re expanding our coverage and continue to introduce new applications.”
Montvale, N.J.-based Geotek, which holds 42 900 MHz licenses covering some 200 million pops, markets its service to small- to mid-sized companies primarily in the field service, transportation and construction industries. The company’s digital service offering includes mobile dispatch and telephony, and integrated software applications such as automatic vehicle location, data dispatch and messaging. Service is available in New York, Philadelphia, Washington, D.C., Baltimore, Boston, Miami, Orlando and Tampa, Fla., Dallas, Houston and San Antonio, Texas, and Phoenix.
Geotek is largely focused on marketing its service through indirect marketing via dealers and through direct mail and telemarketing. In addition, it advertises on radio, television and in industry publications.
“They’re finally getting through the distribution channels,” said Virostek. “Their message is of value, defined by data and voice. Companies within their niche need those services.”
In the next six to nine months, Geotek said it plans to double the number of sites in its existing markets, and build out six new markets in 1998.
After years of facing aggravating regulatory and technical hurdles surrounding the use of 220 MHz spectrum, Torrance, Calif.-based Roamer One, a wholly owned subsidiary of Intek Diversified Corp., is focusing its efforts on six markets-Los Angeles, Kansas City, Minneapolis, Phoenix, Cleveland, Ohio and New York. In July, the company announced it was in the midst of an aggressive campaign to load customers in 10 markets. That effort only paid off with about 1,000 customers, however.
The operator has since refocused its strategy, relaunching its sales and marketing campaign in just the past two months, said Scott Henderson, Roamer One’s vice president of sales and marketing. Supporting roughly 1,800 customers, the company said interest in the service has skyrocketed.
Roamer One’s strategy is to target industries similar to those Geotek wants-construction, transportation and service industries. Focusing primarily on the voice market, it offers voice dispatch and data service for a flat monthly rate. Roamer One uses linear modulation transmission technology developed and patented by Securicor Radiocoms Ltd., one of its sister companies.
“It’s been a slow start,” said Henderson. “Roamer One was an unknown entity. We had to prove ourselves and make mistakes.”
Roamer One is studying different marketing techniques for its small, medium and large markets. “We’re developing a model that will give us the road to success,” said Henderson. “We’re offering something special in one market vs. another market. We recently introduced a rental radio that includes airtime. What we offered in another market as a test was a $13.95 lease for voice-only radio. That was widely successful.”
Roamer One markets primarily through telemarketing and direct mail. The carrier also is planning a larger advertising effort that includes industry magazine and billboard advertising. Its partnership with its other sister company, Midland USA, allows Roamer One to jointly train radio dealers in programming and installation. Midland is Roamer One’s parts warehouse and distribution center. Roamer One owns or manages about 1,245 channels and continues to aggressively buy up other 220 MHz licenses through acquisitions.
The company plans to provide virtually nationwide seamless coverage and is able to fill out its footprint by managing licenses owned by other parties and using its brand name. In February, the operator plans to launch another six markets.
Though all three carriers are targeting virtually the same customers, all provide unique services attractive to different segments, said Strategis’ Virostek.
Roamer One maintains it will capture customers who don’t want to use Nextel service anymore. Nextel has been moving its analog customers to digital service, resulting in higher monthly rates, and some customers have become frustrated by this, said Roamer One.
In markets like Phoenix, where both Roamer One and Geotek operate, Roamer One said it attracts customers who primarily need voice service.
“For those people that need just voice service, we sell a product that is just voice that has the capability to move into data service later. With Geotek, you have to buy voice and data at once or not at all,” said Henderson.
“Roamer One is looking at serving the two-way dispatch market. You can use some data services over the network, but I have yet to see them coming to market with a prepackaged solution” like Geotek’s, said Virostek.
Geotek believes it doesn’t have a true competitor.
“If you look at the applications we provide, the front end is a PC, not a dispatch station. It’s not a radio. The power that we provide is in our application,” said May. “Other companies like RAM and Ardis, do provide data services, but they do not provide voice services. PCS, cellular and even Nextel really
aren’t focused to the degree we are on providing those types of solutions … They’re seeking much larger, mo
re significant numbers (of customers). We are business to business. We require less infrastructure, which enables us to be profitable by providing services to a smaller number of businesses.”
Virostek believes Nextel will have a greater impact on the mobile phone industry than the SMR industry. Because of the company’s presence in most of the major U.S. cities, it is loading customers quicker than cellular and PCS carriers. Nextel’s churn rates remain lower than the mobile phone industry’s because of the unique service offering, and customers must make significant investments in the service upfront, he said.
