Fulfilling repeated claims to launch service by the end of this year, Verizon Wireless introduced its highly anticipated Push to Talk service last week, which, in addition to providing Verizon Wireless customers with another way to communicate, is expected to supply the first serious competition for Nextel Communications Inc.’s Direct Connect service.
Verizon Wireless said its Push to Talk service, which uses the carrier’s CDMA2000 1x network and infrastructure from Motorola Inc.’s recently acquired Winphoria division, would be available nationwide beginning today.
While the service is expected to be compared against Nextel’s Direct Connect offering, which Nextel has offered for more than 10 years and recently enhanced to provide nationwide capabilities, analysts noted Verizon Wireless’ service includes a number of advantages, including a self-provisioning contact list allowing customers to add contacts and set up calling groups from a specially designed Web site, an easy-to-understand user interface and the use of one phone number for both cellular and push-to-talk calls.
“The user interface is the key to the whole thing,” said Adam Guy, senior wireless analyst at the Yankee Group. “If the service is not easy to use, there is no reason for a customer to go out and purchase a new handset and try the service.”
The enhanced user interface allows users to see if members of their contact list are available for a push-to-talk conversation.
Verizon Wireless said Push to Talk price plans would begin at $60 per month for 400 anytime cellular minutes on its America’s Choice network and unlimited one-to-one nationwide push-to-talk calling minutes. The carrier added that customers who signed up for service before Nov. 2 would receive 1,000 national mobile-to-mobile cellular minutes and on plans of $80 or more an additional 100 or 200 bonus anytime cellular minutes. In addition, customers signing up before Dec. 31 would receive free Group Push to Talk calling for as long as they stay on their service plan, though the carrier did not release separate pricing for the group calling option.
Nextel offers a number of pricing plan options for its Direct Connect service. Its most comparable plan offers the same 400 anytime cellular and unlimited Direct Connect calling minutes as Verizon Wireless, though unlimited Nationwide Direct Connect is an additional $10. Nextel’s plans include free incoming calling minutes, which Verizon Wireless does not offer.
Analysts noted Verizon Wireless’ Push to Talk prices are a $20 premium over its current America’s Choice offering and were encouraged that the pricing models did not drastically undercut Nextel’s plans, which they felt could have led to a revenue-degrading pricing war.
In addition to providing the push-to-talk infrastructure, Motorola also supplied its v60p handset for the launch. The handset is similar to the company’s v60 product line with the addition of a speakerphone and accompanying vents molded along the lower side of the keypad as well as the necessary push-to-talk button on the side of the handset. Verizon Wireless priced the handset at $150 with a two-year contract and is expected to add a Samsung Corp. A690 handset in the near future.
Verizon Wireless said it will offer a $10 discount on an extra battery for the v60p handset, which should quell concern about the shorter battery life of the handset compared with the non-push-to-talk v60 models.
Motorola said it expects to deliver a “series” of CDMA push-to-talk handsets over the next year and hinted it would also provide GSM-based push-to-talk handsets.
While Verizon Wireless provided a number of details regarding its Push to Talk service, it would not reveal the exact latency of the service, saying only it would be comparable to Nextel, which says its latency is less than one second. Industry sources who claim they have tried similar offerings from Winphoria reported a two- to five-second delay in initial call setup and around a one-second delay during a push-to-talk session. While Verizon Wireless’ latency would seem to fall short of Nextel’s sub-one-second call set-up time, the carrier said initial call setup would be faster than dialing a number by hand, and customers likely would not notice any in-call latency.
“I don’t think a couple of seconds delay will be a big deal to users who have not tried Nextel’s service, but for current Nextel customers looking to switch to Verizon, the delay may kill the deal,” said Guy.
Others noted if Verizon Wireless’ service does have a noticeable latency issue, Nextel could launch a vicious campaign questioning the quality of Verizon Wireless’ network and service.
Guy noted Verizon Wireless’ use of one number for both push-to-talk and cellular calls was advantageous compared with Nextel’s Direct Connect service, which requires customers to have a separate cellular and Direct Connect identification number, and t business users could be swayed by Verizon Wireless’ easier-to-manage group calling feature.
Nextel seemed unconcerned about the launch, noting its network was designed from the ground up for its Direct Connect service, it has had more than 10 years of experience operating the service, and it currently counts more than 11 million customers with Direct Connect-enabled handsets.
Analysts were more concerned about the impact on Nextel, with some going as far as saying the Verizon Wireless launch could prove to be a disaster for Nextel, which to this point has relied on its Direct Connect service to differentiate itself in the market and to target higher-valued and more loyal business customers.
The concern is expected to increase later this year when Sprint PCS has said it plans to launch its Ready Link push-to-talk offering sometime in the fourth quarter and recently announced customer trials in a handful of markets.
“We do expect the Verizon and Sprint products to introduce price competition to Nextel, as well as raise churn,” commented Tom Watts, telecommunications industry analyst at SG Cowen, who added he did not think the increased competition would have an impact on its forecasts for Nextel’s earnings per share or free cash flow.
Alltel Corp. has also announced it is looking at a push-to-talk offering, hinting it could launch a service by the end of this year. GSM carrier AT&T Wireless Services Inc. also said it expects to begin testing a similar service early next year.
Nextel could have an ace in the hole in regards to Verizon Wireless’ launch as some analysts claim Verizon Wireless’ use of the Push to Talk label is in violation of Nextel’s recent trademark of the term in June, which some claim pushed Verizon Wireless’ initial launch plans for its service from the original July 1 date. If Nextel is able to prove a trademark violation, Verizon Wireless could be forced to rename its service or have to pay Nextel a fee to use the Push to Talk label.
A Nextel spokeswoman said the company would look into any use of the Push to Talk label that would be covered by its trademark.
Others have questioned the validity of Nextel’s trademark claim to Push to Talk, noting the phrase is a generic term that has been used by the walkie-talkie industry for more than 50 years.
“At this point I don’t think it matters,” said one industry analyst who asked to remain anonymous. “Verizon would have not launched its service if it was not confident it could use the name.”
