Top Paging Carriers Exit Retail Though Two-Way Selection Grows

NEW YORK— Potential sales of two-way N-PCS pagers will grow in coming months as more suppliers enter the market and prices become more affordable, but for most retailers, the favorable trends are coming too late.

Of the five major traditional paging carriers still in business, Arch Wireless and WebLink Wireless announced plans to leave the indirect retail channel, and a third, Metrocall, said it won't rush to fill the void left by its competitors. The fourth carrier, SkyTel, continues to sell service through Office Depot, Staples and CompUSA.

Cue Paging said it never targeted indirect retail.

The Arch and WebLink announcements follow the withdrawal by Positive Communications from the retail market. Positive, once the largest reseller marketing through the retail channel, was sold off last year to Network Services, which markets direct, carriers said.

Nonetheless, paging isn't completely dead at retail. Some resellers, including local phone companies, might still be offering the two carriers' services in a limited way to retail channels. In addition, an Arch spokesman mentioned that its local sales offices "might continue to sell to local wireless specialty stores." And two-way e-mail services from packet-data networks Motient and Cingular (formerly BellSouth Mobile Data) are still available to retailers through ISP EarthLink and reseller GoAmerica. These services are marketed in large part as wireless extensions of a user's existing corporate or ISP e-mail address.

"Retail is a significant channel for us," said a spokesman for EarthLink, which currently resells Cingular's airtime with its e-mail services. GoAmerica, on the other hand, said indirect retail, include online retail, is secondary in its marketing efforts.

The Arch and WebLink withdrawals follow years of carrier consolidation and financial weakness caused by multiple factors, including:

• competition arising from the declining cost of wireless-phone service and phones,
• a continued decline in the one-way paging subscriber base,
• and the continued high cost of two-way pagers and service compared to wireless phones and voice service.

The carriers said they are pulling out of retail to focus on direct sales, sales to resellers, and sales to the enterprise, where device and service costs are more likely to be justified if they increase the enterprise's revenues.

"Retail is a very costly business that we couldn't support profitably," said Topper Pardo, WebLink's senior marketing VP. "In all likelihood, we will continue sales [through retail] through this calendar year."

WebLink, operating in Chapter 11, was founded in 1989 as PageMart to target retail almost exclusively.

Arch Wireless, also in Chapter 11, "stopped all retail shipments at the end of April," said Mike Lurie, VP/GM of the consumer products division. He cited high churn rates, "the capital to maintain a presence at retail," and the high cost of two-way N-PCS pagers, the messaging industry's only growth segment.

"The price points were high for consumers: $400 for Motorola's P935 and $179 for the T900. The price rules out a lot of people," he said.

Randy Forster, Metrocall's senior VP of sales and distribution, also cited the high cost of selling through retail. "We pay $129 for a T900, and retailers want to sell it at $59," he said. "Retail has never been our priority because of the cost of doing business." Not only do retailers want carriers to buy down the cost of devices, but they also "want a lot of MDF," he said. Metrocall won't fill the vacuum left by Arch and WebLink "unless retailers come to their senses," he said.

Nonetheless, Forster noted, "We have no orchestrated plans to get out of the indirect business." The carrier continues to sell through Ritz Camera and AT&T Wireless stores. "In the old days," he noted, "we did a little more at retail."

For its part, SkyTel said it has partnered with small retailers "through online resources" to complement sales through Office Depot, Staples, and CompUSA. SkyTel also said it's "continually expanding the channels which will deliver wireless data, email, messaging and voice products and services to the consumer."

Ironically, although carriers cited the high cost of two-way N-PCS pagers as one of the reasons for the failure of two-way paging at retail, prices are expected to fall in coming months. In another bit of irony, carriers said prices will fall because Motorola decided to leave the market that it pioneered and dominated.

"When Motorola announced it was leaving, it sent shockwaves throughout the industry, but as it turns out, it's the best thing that could have happened to us," said WebLink's Pardo. Motorola, he said, has relaxed its "onerous" ReFlex two-way licensing process now that it's exiting, paving the way for competitors to offer lower priced products. The new products will be less expensive not only because of lower licensing fees, he said, but because the new competitors don't have "Motorola overhead and advertising to support."

A two-way ReFlex model with operating system and 8MB of memory, for example, is under development by Sun Telecom and will likely sell to end users for less than $250 compared to Motorola's OS-equipped P935, which retails for $395 with only 4MB of memory, Pardo said. The Sun version will also add the ability to run Java-based J2ME programs.

Sun also plans a non-OS model at about $120-$130 compared to the typical $150 for a Motorola T900, but it will add memory, larger screen, and rechargeable battery, Pardo said.

The first non-Motorola two-way model, however, will likely be available from Nixxo later this year at about $130-$150, Pardo said. It will lack an OS like the T900 but will add memory, a larger screen, rechargeable battery, calculator, and address book. Other companies' ReFlex models are targeted for fourth-quarter availability, Pardo said.

Meantime, a U.K.-based CE manufacturer, Multitone, plans to buy Motorola's two-way device business and continue marketing Motorola's devices until it develops its own products, Pardo said.

Motorola said it received its last orders for one- and two-way pagers and will ship them by the end of June.