Nextel Communications Inc. - 2004

Nextel Communications Inc. - 2004

Healthy competition within any industry is a vital element of ensuring that the best quality service reaches the customer at the lowest possible price. In fact, the wireless communication industry has proven this by continually increasing the quality and variety of its services while lowering the prices for these services. Cell phone customers now have a huge variety of choices to meet every conceivable need. The problem for communications companies now is that the market is being saturated, and concomitantly, competition is increasingly significant. It is perhaps little wonder then that the largest competitors are stooping to actions such as law suits in order to mitigate competition and secure the market share for particular developments. And example of this is Nextel Communications, Inc. And its dispute with Verizon over its walkie-talkie service.

The core of the dispute is Nextel's accusation that Verizon has used false advertising in its campaign and that the company has stolen Nextel's slogan, "Push to Talk." Verizon's new development follows on the heels of the walkie-talkie service, and hence Nextel is suspicious of Verizon's creation. The problem is that Verizon could win the dispute and be allowed to proceed with its plans. This could result in substantial competition for Nextel's service, along with its loss of legal fees and man hours in the legal dispute.

While it is quite logical for Nextel to enter the legal dispute, and while the company's grievance appears legitimate, the company might also consider whether such fees would not be better applied to responding to the rising competition. In an industry that is as highly competitive as wireless communications, companies might expect that similar products at competitive prices will be developed. Law suits for each for these new developments would be expensive and unwarranted. Rather than spending valuable revenues on these in addition to possibly tarnishing the company's reputation, the time and resources could more valuably be applied to developing new and more competitive products.

The high competition rate in the industry necessitates fast and numerous new developments. Nextel Communications Inc. can much more valuable spend its time and money by investing in new ideas. Court cases take time and energy, while also being highly detrimental to the creative process. In this way, losses are incurred not only in terms of legal fees and work hours, but also in terms of creativity and new products within the company.

In addition, law suits could have a detrimental effect on a company's reputation. If Nextel were for example to lose the case, Verizon receives the right to continue with their product. Potentially, Nextel's reputation could be harmed by its involvement in an apparently petty attempt to corner the market on their product. Even if the company wins, the result could be equally damaging in terms of lost hours as well as creativity and reputation damages.

Furthermore, the company's existing competitive edge is significant enough to help the company respond to competition products without the help of time- and cost-consuming legal action. Walkie-talkie is a single new service. The company has survived increasing competition since the 1980s. It is difficult to imagine that Nextel would be unable to respond to a similar new product from a rival company via further innovations attached to the walkie-talkie service.