PUSH-TO-TALK BATTLE ERUPTS IN WAR OF WORDS

After one month of push-to-talk competition between Verizon Wireless and market incumbent Nextel Communications, Verizon is insistent it has made strong inroads—even as critics lambaste the service quality of the company's application.

Denny Strigl, president and CEO of Verizon Wireless, said last week that the company's push-to-talk service is selling ahead of expectations. Dick Lynch, chief technical officer, said the carrier already has ordered more Motorola V60p push-to-talk enabled phones based on the application's early success. Verizon plans to make a second push-to-talk handset available before Christmas, Lynch said.

At the same time, however, analysts and users who have tried Verizon's push-to-talk offering maintain that they are not impressed with it, due in large part to call set-up and intra-call latency problems. Those critics claim Verizon's service lags behind the less-than-one-second standard that has been Nextel's mantra the past 10 years.

Wireless PUSH-TO-TALK UPDATE: fastmobile adds U.S. sales partner Sep 15, 2003, TelephonyOnline.com

In an exclusive interview with Telephony last week, Lynch acknowledged that latency on the carrier's service is greater than Nextel's, but he defended Verizon's offering as superior overall and pledged that the carrier will make the changes necessary to boost quality.

“Yes, the latency's there,” Lynch said. “We will improve it in any way possible. We will conduct three to four incremental latency reductions. These will be in milliseconds of improvement over the next couple years, but those milliseconds add up.”

Indeed they do, according to critics of Verizon's one-month-old service. Telephony interviewed three current Nextel users and two Verizon users, all of whom have tried push-to-talk from Verizon. Without dissent, they said the service's overall call latency was below expectations.

“The latency is there, though it maybe more obvious because I'm used to Nextel,” said one Nextel user in New York City who made several trial calls with the help of a Verizon Wireless retail store employee.

“I'm not going to buy it for now,” said a Verizon Wireless customer who tried the services of both Nextel and Verizon on the same day last week. “The calls I made took longer to initiate, and the intra-call response seemed longer, too.”

Industry analysts voiced similar concerns. “We trialed it down here in Miami, and we were not impressed,” said Patrick Comack, senior equity analyst at Guzman & Co., which is based in Coral Gables, Fla. “There was material call set-up and intra-call latency. It might make Verizon's phone service stickier for someone who doesn't use PTT as much, but it's not otherwise going to win over Nextel's heaviest users.”

Ned Zachar, director of telecom services research at Thomas Weisel Partners in New York City, agreed. “It will hurt Verizon's efforts to win those customers because latency is a big issue for them,” he said. “It's also priced at a premium, which won't help.”

Comack added, as did other analysts, that the carrier may have made a strategic mistake in launching the service with such an aggressive advertising campaign. In launching a product with greater latency, Verizon has exposed itself to dyed-in-the-wool Nextel users who may try the service, notice the difference and not come back, Comack said.

Lynch dismissed the idea that a large number of users will refuse to buy the service based on the latency issue, when they look at what else Verizon is giving them. For example, Lynch pointed out that Verizon users easily can manage their group call lists via the Internet. Presence management functions allow for an icon for every group list member, which changes as that user initiates a call, ends one or turns off the phone.

Verizon users also only require a single phone number to do push-to-talk and other calling, he said. Nextel issues users regular phone numbers and separate nine-digits identification numbers to conduct push-to-talk calls.

“The latency thing is a torpedo from our competitor,” Lynch said. “When users see things like our presence management, they'll see that it's a bigger deal.”

Meanwhile, Nextel isn't standing pat on its market-leading service. The carrier, which completed rollout of its Nationwide Direct Connect just a few weeks before Verizon launched its offering nationally, announced Direct Connect availability for the northern part of Mexico's Baja California through NII Holdings, a Latin America iDEN network operator in which Nextel owns a 35% stake.

The foray into Mexico is the first step in an international strategy that will next take the carrier into Canada, said Greg Santoro, vice president of Internet and wireless services at Nextel. “We have a lot of subscribers in the southwestern U.S. that wanted it, and NII has built iDEN sites there, so that makes it a seamless place to start,” Santoro said.

In addition to Nextel's expansion efforts, Weisel's Zachar said he expects the carrier to continue to enhance overall network coverage with increasing competition and local number portability nearing.

Santoro said the Mexico offering wasn't a response to Verizon's recent launch. “What our competition is doing had no bearing on this decision,” he said. “Our ‘sub-second’ latency and nationwide—and now extended—coverage speaks for itself.”

Still, the current marketing and advertising slugfest between Verizon and Nextel suggests that the two competitors are paying quite a bit of attention to one another. In its broadcast ads, Verizon mocks Nextel's network coverage shortcomings, while Nextel ads make jabs at Verizon's latency.

Verizon's Strigl addressed the marketing issue at the Morgan Stanley Media & Communications Conference last week. “Nextel's ads are entertaining me,” he said. “The competition's users are telling us they're unhappy with their current service.”

Verizon would divulge neither customer numbers nor the number of Nextel customers it has converted. “We have sold a whole degree of magnitude more devices than we thought we would have at this point, and new devices that we introduce to the network will not have an effect on quality,” Lynch said.

How Verizon's new service might affect other potential push-to-talk competitors remains to be seen, however. Sprint PCS has been testing push-to-talk for at least two years and has indicated it would launch its service, reportedly called ReadyLink, by the end of this year.

Sources speculated last week that ReadyLink will launch sooner, possibly as early as Sept. 22. Sprint PCS representatives declined to confirm or deny that.

Sprint PCS President Len Lauer, also speaking at the Morgan Stanley conference last week, said his company's service would compare well to Verizon's. Several analysts said they doubt that Sprint PCS will be able to match Nextel's latency mark, and several also said they expect would-be competitors such as Sprint PCS, AT&T Wireless and Cingular Wireless to launch push-to-talk no sooner than some time next year.

But there already is more competition: fastmobile, which offers a push-to-talk-like voice instant message service in the U.S. Last week fastmobile expanded its service, called fastchat, into the U.K. The fledgling firm's differentiating points are its focus on the 18- to 30-year-old demographic and the ability to download fastchat and other applications from the Internet to Symbian smartphones.

Harry Eschel, co-founder and vice president of marketing at fastmobile, said the marketing blitz by Verizon and Nextel is helping his firm. “They are putting a ton of money into educating the market,” Eschel said. “We have seen an uptick in dealers contacting us about distributing our service because they are perceiving a need for it.”

As for fears of competition from the giants, Eschel said,“Verizon isn't really coming after our demographic. They're in their sandbox, and I'm in mine.”

A sandbox is also an apt metaphor for push-to-talk service boundaries. There is no way for customers of different carriers to use push-to-talk with other carriers' users. Verizon's Lynch said push-to-talk interoperability with another CDMA carrier would not be technically difficult, but added “I'm not sure I want to do that with another carrier tomorrow.”

Elsewhere, a group of GSM vendors led by Ericsson, Nokia, Siemens and Motorola made progress on that front last week, sending a new standard to the Open Mobile Alliance that defines intercarrier push-to-talk for GSM. No GSM operators have launched push-to-talk yet, but Ericsson will have a commercially available push-to-talk product in 2004, said Jonas Ericsson, director of push-to-talk programs at Ericsson.

Call latency was key to setting the GSM standard, he said. “We have tested it and reached delays of a little bit more than one second. We will improve on that.”