November 26, 2004

Nextel Expands New England Coverage for Signature Push-to-Talk Service

Nov. 26--Facing new competition for its signature walkie-talkie DirectConnect service, Nextel Communications Inc. has substantially expanded its New England territory in the past two to six months, including to many parts of Central and Western Massachusetts.

Nextel's DirectConnect service has helped the carrier achieve the industry's highest average revenue per subscriber, $69 a month, and best customer-retention numbers. But the Reston, Va., company has lagged most national brands in geographic reach.

In the past year, Verizon Wireless and Sprint PCS have both launched push-to-talk services in hopes of eating into Nextel's franchise among construction workers, delivery fleet drivers, and trade workers.

Industry analysts have generally found that the Verizon and Sprint services connect less rapidly than Nextel's, which is on track to add more than 700,000 subscribers this quarter and close the year with over 16 million.

"We still think we offer the best push-to-talk service out there, but we know we can't rest on our laurels and we need to improve coverage both for existing customers and prospective customers in areas where we have not had coverage," Nextel spokesman John E. Redman said.

Over the past six months, Redman said, Nextel has activated cell sites in several areas of Western Massachusetts it previously could not serve, including Athol, Great Barrington, Greenfield, Lenox, Pittsfield, and several communities along routes 2 and 9 and Interstate 91.

This fall, Nextel added coverage in the Sebago Lakes and Kennebec County areas of Maine, ski resorts in Mount Sunapee and North Conway, N.H., Plymouth State University, and northern stretches of I-93 in the Granite State.

Deployment on those areas followed Nextel's launch of service on the outer reaches of Cape Cod up to Provincetown, at Otis Air National Guard Base, and in several areas of Nantucket.

Network coverage quality has emerged as a critical competitive battleground for wireless carriers.

Since acquiring AT&T Wireless for $41 billion this month, Cingular has targeted Verizon's reputation for the best voice coverage with heavily promoted claims that it now owns the country's largest digital voice and data network, which it promotes as the "allover network."

Last month, global consulting firm Capgemini's telecommunications practice released a study showing that 60 percent of US wireless subscribers cite network quality and coverage as the primary reasons they would consider switching to another carrier. A total of 49 percent said they are not happy with their current coverage, Capgemini found.

The AT&T acquisition has enabled Cingular to call itself the biggest US carrier, with 46 million subscribers to longtime industry leader Verizon's 42.1 million.

But Verizon's vice president for East Coast network development, David Heverling, said in a recent interview: "We're not worried about being the biggest. We're worried about being the best. Network reliability is what we sell" and spend roughly $1 billion every three months to attain.

Raul Katz, president of Adventis, a Boston consulting firm that specializes in wireless and telecommunications, said Nextel's expansion will help it to attract and keep customers, but its reputation for a superior push-to-talk probably remains its best marketing advantage.

"I don't think the extent of their coverage has been a hindrance for Nextel," Katz said.

More than 70 percent of wireless subscribers use their phones exclusively within a specific geographical zone, and in areas where Nextel has at least comparable coverage to other carriers, Katz said, "There are business segments that are owned by Nextel because of DirectConnect."

Nextel has spent $2.4 billion in network upgrades nationally so far this year, a rate of spending heavily driven by its use of a unique communications technology that does not allow subscribers to get "roaming" coverage from other carriers.

Verizon and Sprint use a common technology called CDMA, or code division multiple access, that helps each carrier use the other's network to fill in coverage gaps.

Likewise, Cingular Wireless LLC, T-Mobile USA, and the former AT&T Wireless Services Inc., now part of Cingular, use a common Global System for Mobile technology that enables roaming.

Nextel is one of only a handful of US carriers, and by far the largest, to use a system called iDEN, or integrated digital enhanced network, developed by Motorola Inc. to support both DirectConnect and conventional phone calls.


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