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New Verizon Wireless Push-to-Talk Service Siphoning Interest from Nextel
Compete, Inc. finds Nextel will lose subscribers to Verizon Wireless when latency issues are resolved
Boston, MA – November 3, 2003 -- Verizon Wireless' entry into push-to-talk services this summer, a market dominated by Nextel, raised questions about the sustainability of Nextel's competitive advantage. Early analysis of the launch from Compete, Inc. indicates that the new Verizon Wireless push-to-talk service will siphon subscribers from Nextel once latency issues with its service are resolved. According to Compete's analysis, almost two-thirds of Nextel subscribers who considered switching to an alternative carrier in September evaluated Verizon and one third of those subscribers researched push-to-talk.
"Push-to-talk services will not be a growth driver for new entrants into the market until these carriers can produce response times that match those of Nextel's Direct ConnectSM offering," said T. J. Mahony, Compete's senior wireless analyst. "The strong interest we are observing in Verizon among Nextel subscribers, however, demonstrates that Nextel's market position is clearly at risk once carriers improve the performance of their push-to-talk services," added Mahony.
To assess how this new competitive entry has impacted the wireless market, Compete analyzed the online research and purchase behaviors of several million consumers to understand consumer demand and purchase intentions for the new push-to-talk offering. The market potential for this service is sizable; reportedly 11 million Nextel subscribers, or 90% of the customer base, have used Direct Connect. And already 25-35% of Nextel's subscribers have used Nationwide Direct Connect, its expanded walkie-talkie capability launched coast-to-coast this year.
According to Compete's proprietary analytic, Share of Purchase Intent (SPI), the Verizon Wireless launch did not substantially improve its already high market share among in-market wireless shoppers (Compete's SPI tracks the relative percentage of pre-purchase consideration carriers command across the market). Compete did find, however, that the level of Nextel subscribers actively evaluating Verizon nearly doubled from August to September. Further, Compete found that push-to-talk was a primary component of this surge in interest – approximately 40% of those Nextel subscribers evaluating Verizon considered its push-to-talk services. In contrast, only 11% of Sprint PCS subscribers who evaluated Verizon researched push-to-talk services.
Compete, Inc. Shows Nextel is Highly Vulnerable to Verizon Wireless
(Percent of "pre-churn" customers evaluating Verizon Wireless – customers who have not yet switched carriers but who have begun evaluating Verizon Wireless online)
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Despite this growth in interest, in the short-term, Compete believes that the slow response times of Verizon's push-to-talk services will be a barrier to switching for interested Nextel subscribers.
"While Nextel's exposure will be most evident among business customers, where the loss of a single account will result in deactivations among all of the corresponding subscribers in that network, we do see an opportunity for Nextel to erect porting barriers in the consumer market that carriers will find harder to overcome," added Mahony. "Whereas it is relatively easy for a business to roll-out a new wireless service across its user base, in consumer markets there are larger hurdles to porting. Over time, consumers establish a push-to-talk network of friends and family and for these individuals it is very difficult to coordinate switching carriers among all of them."