Can This Company Destroy Pricing for AT&T And Verizon?
Clogged networks have made wireless data a precious commodity, but one innovator group has a plan to not just cut costs for consumers, but bring them down all the way to zero. FreedomPop is on its way to launching a free mobile Internet service for U.S. users this summer, a move that is likely to demand a change of strategy from established wireless providers.
FreedomPop will use Clearwire’s (NASDAQ:CLWR) WiMAX network to give users one gigabyte of free mobile Internet access per month — more than most users currently consume. The company plans to offer an Apple (NASDAQ:AAPL) iPhone case that will provide access for mobile use and act as a hotspot for eight other devices, a USB attachment for use on laptops, and a Wi-Fi hotspot device that will be able to connect up to 20 devices to the Internet.
At the moment, AT&T (NYSE:T) charges $50 per month for a five-gigabyte plan that can be used with a USB modem or a mobile hotspot and comes with a two-year contract. Its smartphone plans starts with a 300-megabyte option for $20 a month. Verizon’s (NYSE:VZ) offers start with a two-gig data plan for $30 a month. Providers also charge as much as $10 per gigabyte for users who go over the limit.
While FreedomPop users will also be charged for going over, the fee will be “cheap,” company marketing vice president, Tony Miller, told Technology Review. The fee may be lower than a penny per extra megabyte. Users won’t even have to pay for its devices, though they will be asked for a refundable deposit to prevent reselling and abuse, Miller added. Analyst Neil Shah told Technology Review that the company may soon have to partner with other mobile broadband partners because Clearwire’s range was still limited.
Miller did not disclose who was behind the company or their revenue model, but said Skype co-founder Niklas Zennstrom was a backer.
Another similar service, NetZero, also provides free and low-cost plans, but only allows 200 megabytes of free data per month, much less than FreedomPop’s offer.
FreedomPop may take some time to figure out the perfect revenue-generation solution and which networks to partner with, but its disruptive innovation looks to be a trend that wireless giants will have to deal with very soon.
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