At a rate of nearly 400,000 new subscriber additions each quarter, U.S.-based Nextel Communications Inc. has been attracting a lot of attention, including from traditional wireless carriers that may try to imitate Nextel’s unique Direct Connect dispatch feature.
Wireless carriers in the United States have followed SMR (specialized mobile radio) operator Nextel’s lead in other areas. Some analysts believe aggressive new pricing plans-like AT&T Wireless Services Inc.’s Digital One Rate plan introduced in May-are one way carriers are responding to Nextel’s per-second billing and no-roaming pricing plans.
Now carriers may be looking for other ways to differentiate themselves from each other and respond to one of Nextel’s competitive advantages-dispatch functionality.
“Cellular carriers are realizing there is a market for this feature, and it happens to be a subset of the most lucrative customer segment-business users,” said Timothy O’Neil, an analyst with SoundView Financial Group, United States.
Dispatch capability, he said, would allow carriers to establish a relationship with a business based on its ability to offer dispatch services to employees who need that capability. With that entrance into a company, the carrier then could offer its traditional wireless voice services to other employees.
“It is a great offensive tool in a highly competitive, undifferentiated marketplace,” said O’Neil.
Wireless carriers “are used to owning the market for business communications,” said Stephen Virostek, director of messaging and dispatch at The Strategis Group in Washington. “They are not used to sharing that pie with anyone.”
Another twist that may provide an additional incentive for carriers to add dispatch functionality is Nextel’s latest handset, Motorola Inc.’s i1000. That handset, said analysts, is small enough to give Nextel its first good chance to compete in the consumer space.
What many wireless carriers have implemented or are thinking about implementing are products that essentially provide advanced speed-dial capabilities. The user presses one button or a certain combination of numbers, but the network actually dials the person or group of people the user is trying to reach.
Alan Shark, chief executive officer of the American Mobile Telecommunications Association, a group that represents the SMR industry, calls these type of features “push-to-connect,” while true dispatch services like those offered by Nextel and analog SMR carriers are better termed “push-to-talk.”
By the time a push-to-connect system connects a call, most Nextel Direct Connect users already would have finished their dispatch call, said analysts. That’s because a push-to-connect call may take up to half a minute to connect, unlike Nextel’s service, which connects the user instantaneously.
“Nextel will continue to have that differentiator for several years to come,” said Bob Egan, research director with analyst firm the Gartner Group. “Direct Connect allows users to connect in two to three seconds, while the switch-based systems take 20 to 30 seconds.”
Some carriers already offer push-to-connect type services. Comcast Cellular Communications Inc. in the United States, for instance, has been offering its GroupTalk service since 1996. GroupTalk allows four-digit dialing within specified work groups.
Manufacturers also have taken an interest in the idea and are working on products to make it possible. Swedish manufacturer L.M. Ericsson plans to introduce servers and ruggedized handsets that will facilitate push-to-connect capabilities. The company said it expects its D-AMPS Pro for Digital Advanced Mobile Phone Service networks to be available in the United States later this year and its GSM Pro Server for Global System for Mobile communications networks to be available during the second quarter of 1999. The handsets for each system also are expected during the second quarter.
As for offering true dispatch services, carriers and manufacturers could be years away from devising systems to make it possible, say analysts. AMTA’s Shark said it would be difficult for carriers that didn’t build networks to support true dispatch from the start to go back and try to retrofit their network to support it now.
“It will be tough, but they have very smart engineers,” said Virostek. “I think they’ll figure out a way to offer it.”
Shark pointed to potential growth in the U.S. wireless industry as another reason carriers won’t offer dispatch just yet. With a penetration rate of about 20 percent in the United States, carriers have a long way to go before they need to think about adding dispatch as a differentiating feature on their networks, added Shark. That story could change in a few years, though, he said.
But some analysts think carriers need to differentiate now, and dispatch is one way to do that.
“At its core, wireless can lend itself to being a commodity product,” said Mark Ein, a principal at the Carlyle Group, a Washington-based private equity firm. “Carriers then have to compete on price, and that’s not good.”
Ein noted carriers are better off adding a unique feature set to their technology as a key differentiator.
While Nextel earlier this year hit a snag in Mexico over wording in its advertising that suggested it offered services different from what it is licensed to offer there, wireless carriers in the United States should have no regulatory problems if they try to offer dispatch services. The Federal Communications Commission in 1995 eliminated a prohibition on the provision of dispatch services by Commercial Mobile Radio Services providers, the group of providers in which by definition cellular carriers are included.
