Rarely does a handset launch embody the challenges and strategies of a carrier and its vendor partner as clearly as the recent offer from Sprint Nextel Corp. and Motorola Inc. of PowerSource handsets.
Sprint Nextel has acknowledged that the loss of post-paid iDEN subscribers is dragging on its performance; the numbers are irrefutable. It must keep those subscribers from vanishing as it seeks to migrate them to its CDMA network, ideally by next year.
Chairman and CEO Gary Forsee said earlier this month that “issues related to the iDEN platform resulted in decreased demand for iDEN services and increased churn.” According to analysts, those issues range from poor network performance stemming largely from re-banding to muddled marketing messages.
“We expect the widespread introduction of our first combined CDMA/iDEN phones and improvements in iDEN network performance to benefit push-to-talk subscriber trends,” Forsee added. This high expectation for short-term improvements in customer metrics undoubtedly will focus many observers on the fate of the new PowerSource handsets in the market. Sprint Nextel’s WiMAX play is a longer-term, strategic prospect.
Buzz and Blend
Two PowerSource-branded, dual-mode handsets, made by iDEN-mainstay Motorola, reached the market in mid-January. The strategy is to keep iDEN customers from leaving for PTT capabilities elsewhere by offering them voice and data services on Sprint Nextel’s CDMA2000 1x network via a choice of either ruggedized or more stylish handsets. The two models-the Buzz, or ic502, and the Blend, aka ic402-will soon appear in new colors, an eye-candy approach that has succeeded in other market segments.
The Buzz is the ruggedized offering built to military specification and sells for $60 after rebates. The Blend is an entry-level offering priced at $40. Both prices require a two-year contract.
Meanwhile, Sprint Nextel will rapidly introduce two more models in the PowerSource line, a high-tier, stylish EV-DO-capable handset due in May and a camera-equipped, ruggedized offering in August. The aggregate goal for all four models is 4 million units by year’s end, according to Sprint Nextel.
“This is a linchpin to our strategy,” said David Owens, director of wireless devices at Sprint Nextel. “We want to continue our leadership in ruggedized PTT.”
Owens said the loss of iDEN subscribers may be due, in part, to a perception that the carrier planned a rapid shutdown of the iDEN network. In reality, he said, there is “no timetable,” though the carrier’s technology roadmap calls for push-to-talk to be enabled on its next-gen, EV-DO Rev. A network by next year. The carrier’s commitment to iDEN, however, extends to 2012, Owens said.
From Motorola’s perspective, the PowerSource line of products represent a long-term, bread-and-butter relationship with Nextel Communications Inc. that transferred to the merged network entity, Sprint Nextel, according to Peter Aloumanis, Motorola’s strategic account manager for the vendor’s relationship with Sprint Nextel.
Historically, Aloumanis said, the iDEN network provided sufficient voice and data quality in the transition from 2G to 2.5G, but the network’s limited ability for multimedia and other high-bandwidth applications dampened its usefulness.
“The PowerSource handsets represent a strategic decision to keep high-use customers happy without expensive iDEN upgrades,” Aloumanis said. “CDMA is the network of choice for investments. For moderate to high use of voice and data, CDMA is a better solution.”
The two, initial models launched in the PowerSource product line-the Buzz and Blend-represent a new understanding of segmentation in the iDEN customer base, Aloumanis said. Some users rely on the phone and data capabilities, while others are primarily interested in PTT. Further, some users want style and consumer-oriented features, while others require the ruggedized devices long associated with the service.
The CDMA PTT roadmap
Motorola met and cleared technical hurdles as it combined the TDMA-based iDEN radio with the CDMA radio in the new handsets, Aloumanis said. Those hurdles included integration, sufficient battery life to power two radios and developing a user interface that would appeal to existing iDEN customers.
Meanwhile, the current challenge for Motorola is to develop a cost-effective, high-performance push-to-talk capability for Sprint Nextel’s EV-DO Rev. A network.
“The cost will have to come down to enable a full migration for iDEN users to CDMA,” Aloumanis said. “We’re working with Qualcomm and Sprint Nextel to deliver that.”
The PowerSource handsets that just launched should help Sprint Nextel provide a better experience for its existing iDEN base, while maintaining its PTT differentiation, according to Avi Greengart, lead handset analyst at Current Analysis. The current models, though “big and clunky,” are a first step to the slimmer, EV-DO models expected later this year.
Getting the dual-mode handset message across to iDEN users is essential, the analyst said.
“In the short- and medium-term, they have to do something to improve the overall iDEN experience for small businesses, taxi dispatch and construction workers,” Greengart said. “This is about protecting the existing iDEN subscriber base and growing data revenue.”
“The phones are quite ugly and, actually, we consider that a plus” in appealing to existing users accustomed to durable, clunky handsets, the analyst added. The ruggedized design reassures existing customers that their needs are being addressed. Yet the forthcoming, slimmer models with consumer features should also address the segmented iDEN base.
“Not everybody is a construction worker, or wants to look like one,” the analyst said.
Meanwhile, the PowerSource line is a win for Motorola in its effort to maintain its position as the dominant iDEN handset supplier, Greengart said.
