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September 25, 2000 |
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Wireless Apps: Problems And Opportunities
Nextel's services bring advantages--and dilemmas--about the IT-Telecom relationship
By Cassimir Medford
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or Nextel Communications Inc., adding a browser to a cell phone is a lot like adding wings to a submarine and watching it take flight. The new appendages change not only the environment in which the device operates, but also the culture, the device's value, and the expectations of people who are interested in buying it.Adding data access to the cell phone brings the world of convergence right to the doorsteps of two technology departments. It takes a device that traditionally has been the responsibility of the telecommunications department and adds a function that's the responsibility of IT. This change--along with the emergence of other instances of convergence, both wired and wireless--is forcing the hand of U.S. businesses: They must either clearly mark the turf between the telecom and IT departments or merge them, once and for all. It's also forcing companies to establish wireless policies before they get overrun by employees' taking matters into their own hands and bringing in devices such as Web-enabled or browser-equipped wireless phones and personal digital assistants through the well-used corporate back door.
Selling cell phones to American businesses hasn't always been a slam-dunk for companies such as Nextel. In the bad old days, sticker shock from bills for even modest cell-phone usage raised the blood pressure of telecom managers and stymied adoption of cell phones. Eventually, the cell phone found its way into many American businesses, largely as employees bought their own phones and management reimbursed them for business-related usage.
But today, telecom managers at many large companies have established cell-phone policies and guidelines, and issue phones owned or leased by their companies. "The carriers said, 'You will actually pay less by coming to us and buying all your handsets and buying a big bundle of minutes,'" says Ken Hyers, an analyst with Cahner's In-Stat Group. "Why would you want your employees buying from a carrier that offers free nights and weekends but charges 40 cents a minute during business hours?"
Now that companies have been sold on the business advantages of cell phones, companies such as AT&T, Nextel, and Sprint PCS are serving up functions such as Internet access, two-way radio, E-mail, and simple messaging. And analysts have projected can't-miss success for cell phones with radio and data features. Nextel, AT&T, Sprint PCS, and Verizon all have launched expensive marketing campaigns to attract commercial customers.
High-profile television ads and attractive positioning in this emerging convergence market have made Nextel easily recognizable--but what's behind the name?
The company was formed in 1993 when Fleet Call Inc. changed its name to Nextel Communications. That year, Nextel started purchasing a large number of wireless-spectrum licenses from small radio-dispatch companies. Nextel sat on the licenses until 1995, when it began a hunt for money. The low-key little company in the unexciting world of radio dispatch had begun its transformation. Wireless pioneer Craig McCaw invested $1.1 billion in Nextel, which got subsequent cash infusions from American Mobile Systems, Motorola, and OneComm.
Nextel continued acquiring wireless companies, and in 1996 ordered $100 million worth of Motorola's then-new integrated digital enhanced network technology and deployed a digital wireless network. This network was the first to offer access to enhanced digital cellular, two-way radio, and text-numeric paging from one phone. Nextel started in Chicago and quickly built an impressive footprint that extended to cities such as Baltimore; Las Vegas; Los Angeles; New York; Philadelphia; Portland, Ore.; San Diego; Seattle; St. Louis; Raleigh, Durham, Greensboro, and Charlotte, N.C.; and Washington, D.C. The company continues to add cities.
The rapid rollout of its network made Nextel attractive to potential acquirers. "That started the on-again, off-again relationship between MCI and Nextel," says David Chamberlain, an analyst with Probe Research. "Early on, MCI made a bid and then bailed out. MCI refused to bite at $42 a share. MCI missed out," says Chamberlain, who notes that the stock has sold for as much as $82 in the past year.
In April, Nextel unveiled Nextel Online, a wireless Internet-access service. Nextel Online gives users phone access to prepackaged information on the Web at 14.4 Kbps. The phone employs a microbrowser from Phone.com to allow access to E-mail, weather, and stock information, as well as text and numeric paging. Nextel is working with a growing community of third parties, including developers and content providers, such as Ameritrade, Google, Microsoft, and MobileID, to add services such as Internet search and access to Microsoft Network's Hotmail and Expedia Inc. Nextel Online provides access only to specific sites, in contrast to the unrestricted Internet access that's standard for wired connections. The service is priced at $19.95 per month.
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