This is a classic article about a classic company… I hope you enjoy!
As the U.S. wireless data industry extols the benefits of packet-based, always-on networks and faster data rates, as well as the importance of selling to the corporate market, one company is quietly offering just exactly those services to just exactly that market.
Nextel Communications Inc., the upstart U.S. wireless carrier that built its nationwide network using Motorola Inc.’s iDEN technology for specialized mobile radio spectrum, operates an always-on, packet-based network for mainly business users and–probably not coincidentally–sports the highest percentage of data subscribers of any U.S. carrier.
“All of the data they’re providing, with very few exceptions, are business-related applications,” said Andrew Seybold of the Andrew Seybold Group. “So the/re following the model that I believe is the right model.”
Industry analysts say that model, as well as the company’s network technology, has given Nextel the undisputed lead in data services among nationwide voice and data carriers. In the year-and-a-half since the company launched its data services, mobile data subscriber numbers have rocketed from zero to more than 1.5 million. That means about 19 percent of Nextel’s 7.68 million customers subscribe to data services.
“That’s far and away ahead of anyone else,” said Jennifer DiMarzio, an analyst with Summit Strategies Inc. “It’s actually pretty amazing.”
The reasons behind Nextel’s rapid progress are varied, but they also offer a glimmer of hope to those looking to the elusive data services market.
The industry has long hailed the benefits of packet-based networks as faster and more efficient for data transmission. Packet-switched networks differ from circuit-switched networks, which make up the majority of wireless networks in the United States, because information is “packetized,” or separated into little bundles, and then sent off to the receiver using a variety of channels. Circuit-switched networks, on the other hand, operate like wireline telephone networks by reserving specific channels for transmissions and keeping those channels open throughout a call. Advanced network technologies, including GPRS and CDMA 1xRTT, are packet based.
The benefit is that spectrum is used more efficiently. Every pause during a transmission–silence that goes unused in a circuit-switched network–is filled with little bits of data in a packet network. Packet-based networks also allow carriers to set up pricing models based on the amount of data a customer uses, instead of simply how long that download took, as well as the ability to track and monitor data use. And, perhaps even more importantly, packet-based networks give users “always-on” access to data services, which cuts out the time it takes to establish and subsequently re-establish a connection using circuit-switched networks.
Nextel “had a terabyte of data go through their network in June, which is pretty high,” said Christine Loredo, an analyst with the Strategis Group. A terabyte equals about 1 billion business letters.
The second–and perhaps more important–eason behind Nextel’s success is that the carrier almost exclusively targets business users, tempting them with a range of business-specific applications and features such as the company’s push-totalk mobile phone function. Business customers account for more than 90 percent of Nextel’s subscriber base.
“The biggest reason (behind Nextel’s success in wireless data) is that they’re focused on the business customer,” said DiMarzio.
Until last year, when the wireless industry was growing by leaps and bounds, companies looked to target both the consumer and business markets with wireless data services. That changed, however, when the consumer market turned up its nose at data offerings and the economy hit a substantial speed bump. Now almost everyone in the industry, from wireless analysts to content and platform providers to small startups, agrees that the business market represents the most important opportunity for wireless data.
And Nextel is at the forefront.
“If it’s just something fun and nifty, people aren’t going to use it,” explained Audrey Schaefer, a Nextel spokeswoman. Nextel’s business applications are useful, which is why the carrier’s data services subscriber base has grown so fast, she said.
With Nextel’s success in wireless data, it’s hard not to draw a comparison between Nextel and Japanese carrier NTT DoCoMo and its i-mode data service. DoCoMo, which is closing in on 27 million i-mode subscribers, is the shining example of what’s possible in the world of wireless data. “Nextel is like DoCoMo because they’re focused on the earlyadopter market,” DiMarzio said.
According to most industry observers, Japanese society is extremely tech-savvy, and i-mode’s services fit in perfectly. In the United States, business users are quick to adopt new technologies that improve workflow. So, in a way, Nextel is targeting the U.S. version of Japan’s wireless market.
Perhaps the most important difference is the companies’ contrasting business models. DoCoMo offers content providers open access to its network–and therefore to its customers–through a flat 9-percent revenue-sharing agreement. Most wireless analysts agree this is a major key to i-mode’s success.
Nextel’s Schaefer said the company has a variety of agreements with content providers, but nothing as open as DoCoMo’s business model She said Nextel approaches each content-provider agreement separately, and possible types of revenue-sharing agreements can vary.